Why are Fairness Concerns so Important? Lessons from Pricing a Shared Last-Mile Transportation System

Abstract

The Last-Mile Problem refers to the provision of travel service for passengers from the nearest public transportation node to the final destination. The Last-Mile Transportation System (LMTS), which has recently emerged, provides on-demand shared last-mile transportation service for passengers. We consider an LMTS that consists of two types of passengers, regular-type passengers and special-type passengers (e.g., seniors, disabled people). The valuation of the last-mile service for special-type passengers is statistically higher than the one for regular-type passengers. Passengers incur disutility from waiting for the last-mile service. In this paper, we explore two fairness guarantees on special-type passengers: (1) the fare for special-type passengers is restricted to be no higher than a given fraction of the fare for regular-type passengers; (2) special-type passengers cannot be served after regular-type passengers. We aim at understanding the role of these two fairness constraints on the LMTS operator's pricing and service priority policies, with the objective of maximizing either profit or social welfare. Our theoretical analysis and numerical experiments using real public transport data show that if passenger waiting disutility is negatively correlated with the last-mile service valuation, i.e., regular-type passengers are more sensitive to waiting time, then with both objectives, the LMTS operator always has incentive to charge special-type passengers no less than regular-type passengers and serve special-type passengers after regular-type passengers. This entails the necessity of enforcing the two fairness guarantees. In addition, even if passenger waiting disutility is positively correlated with the last-mile service valuation, i.e., special-type passengers are more sensitive to waiting time, the two fairness guarantees are still necessary under some market environments. These findings demonstrate the importance of fairness concerns in shared transportation systems.