Private vs. Pooled Transportation: Customer Preference and Design of Green Transport Policy

Abstract

Problem definition: Large cities around the globe are facing an alarming growth in traffic congestion and greenhouse gas emissions, to which a significant contributor in recent years are on-demand cabs operated by ride-hailing platforms. Newly emerged pooled transportation options like shuttle services are cheaper and greener alternatives. However, those alternatives are still new to many customers and policy makers. The design of their promotion policies demands careful investigation. This paper studies how we can reduce the number of on-demand cabs on the road and, therefore, their GHG emissions by promoting pooled transportation such as shuttle services. Methodology/Results: In this work, we use detailed usage data and build a structural model to study customer preferences of price and service features when choosing between private cabs and a scheduled shuttle service. Using the estimated model, we identify and evaluate the efficacy of improving service features like reducing the walking distance to shuttle stops on customers’ choices of transport and, therefore, the number of ride-hailing vehicles on the road. We find that a 20% decrease in walking distance can achieve 40% of the benefits of commonly adopted congestion surcharge policies. It can also reduce up to 4.8 thousand tonnes of GHG emissions, which is worth over a million dollars per year. In addition, we demonstrate the implementability of walking distance reduction policies by adding stops on existing shuttle routes. Managerial implications: Reducing the number of ride-hailing vehicles on the road has become an important goal in many cities’ green transport policy design. For example, cities like New York have implemented congestion surcharge policies targeting ride-hailing vehicles in recent years. Our findings suggest that, by changing operations levers such as service features of pooled transport, cities can achieve a substantial amount of benefits from reducing congestion compared with congestion surcharge policies with essentially zero cost, leading to much more efficient green transport policies. Supplemental Material: The online appendix is available at https://doi.org/10.1287/msom.2022.0569 .