Ride-sourcing market equilibrium analysis and optimization under immediate matching strategies

Abstract

Supply/demand characteristics and price strategies in the ride-sourcing market are affected by matching strategies. In particular, immediate matching strategies are widely adopted to tackle supply–demand imbalance issues. This paper studies a two-sided ride-sourcing market under two immediate matching strategies: driver-first-come-first-serve and passenger-first-come-first-serve. In the former, the system is considered over-saturated with passengers, such that any driver is matched immediately upon posting their availability. Therefore, the market would be devoid of waiting drivers. In comparison, the latter strategy is oversaturated with drivers, such that any newly arriving passenger is immediately matched, and there are no waiting passengers in the system. We first derive generalized supply and demand functions and prove that the immediate matching strategies are optimal to maximize the number of completed trips under certain conditions based on equilibrium analysis. Then, we characterize the market equilibrium and discuss the properties of the wild-goose-chase phenomenon under two immediate matching strategies. We optimize the ride-sourcing platform's strategies to achieve a joint profit of platform and driver maximization (monopoly optimum), social welfare maximization (social optimum), and second-best optimum (entailing a reservation profit for the platform). Numerical experiments are conducted to demonstrate the effects of user heterogeneity, and the properties of pricing strategies under both matching strategies on the monopolistic and social optimal solution. The gained managerial insights provide suggestions for decision-makers to coordinate supply and demand in the ride-sourcing market.