The optimal pricing for green ride services in the ride-sharing economy

Abstract

• Introducing electric vehicles to ride-sharing platforms is inevitable. • A game-theoretic model is utilized to examine the pricing for green ride service. • Consumers’ environmental awareness and drivers’ opportunity cost are considered. • The pricing strategy is examined under dynamic price and dynamic wage contracts. With the growing awareness of environmental protection, it has emerged as inevitable for ride-sharing platforms to introduce electric vehicles (EVs) and incorporate into the trend of sustainable transportation. To promote the popularization of EVs in the ride-sharing economy, the platforms need to understand uncertainties faced by EV drivers and eco-friendly consumption behaviors exhibited by consumers. With an analytical model that captures the characteristics of ride-sharing participants, this paper examines the pricing mechanism of a profit-maximizing ride-sharing platform operating two ride services, a basic ride service via general vehicles powered by fossil fuel and a green ride service via EVs. We find the optimal price of green ride service under the dynamic pricing contract and the optimal wage under the dynamic wage contract. We show that if there are more consumers than drivers for the green ride service, the optimal solution is independent of the opportunity cost of EV drivers.