The impact of ride-hailing service on social welfare—A passenger transfer perspective

Abstract

The demand of traditional transportation has reduced after the emergence of ride-hailing services. Some studies suggest that passenger transfer from traditional to ride-hailing transportation is the main reason for this change.Based on the classification of traditional and ride-hailing transportation, a theoretical model is constructed to analyze changes of car trip volume and social welfare from the perspective of passenger transfer. The results show that the emergence of ride-hailing services does not necessarily increase or decrease car trip volume but does depend on factors that affect ride-hailing structure of transaction volume and vehicle utilization efficiency.Although passenger surplus increases, external costs and operator profit will not necessarily increase or decrease. Therefore, social welfare change depends on factors that affect structure of transaction volume and vehicle utilization efficiency in addition to the relative unit operating cost and unit external cost between traditional and non-pooling transportation. Social welfare will increase when these factors meet certain conditions by increasing operator profit and decreasing external costs.When a ride-hailing platform adopts a price subsidy for passengers, the target scale within a certain range is not only beneficial to the ride-hailing platform, but also may increase social welfare.