Optimal strategy of taxi drivers at airports by a stochastic programming approach: Evidence from airports in China

Abstract

It is applicable to address how taxi drivers make optimal choices at airports by mathematical modelling owing to its impacts of service quality. This study formulates such a problem by a new stochastic 0-1 integer programming model such that the research gap of the literature is filled. Specifically, when net gains of the taxi service in urban areas are random, the downside semi-deviation risk of the total profit is considered in this model, and on the basis of its property analysis, a number of useful decision thresholds are derived. A time threshold associated with price differences is defined and when it is greater than the required actual time of waiting for passengers, waiting is the optimal choice. Appropriate conditions are given to answer when the decision-making mode of the developed model is either risk-taking or risk-averse. The derived expected-profit-maximization and risk-minimization model by expectation method is proved to be risk-neutral. Main findings include: The provided thresholds are of easy use for taxi drivers to earn the maximum profit, while the stochastic model is more applicable; Optimal strategy of taxi drivers at airports depends on the service periods, the needed time of driving on freeway, the relative difference of net gains earned by driving on freeway and in city, and the critical number of queuing taxis at airports; By our model, different optimal decision in line with service periods are provided; Except two earlier periods, shortening expended time of boarding a taxi can greatly attract taxi drivers' waiting at airports.