Shared-Ride Efficiency of Ride-Hailing Platforms

Problem definition: Ride-hailing platforms offering shared rides devote effort to reducing the trip-lengthening detours that accommodate fellow customers' divergent transportation needs. By reducing shared-ride delay, improving shared-ride efficiency has the twin benefits of making shared rides more attractive to customers and increasing the number of customers a driver can serve per unit time. Methodology/results: We analytically model a ride-hailing platform that can offer individual rides and shared rides. Contrary to naive intuition, we show greater customer sensitivity to shared-ride delay and greater labor cost can reduce the value of improving share-ride efficiency. Contrary to naive intuition, we show that an increase in shared-ride efficiency can prompt a platform to add individual-ride service. We show that increasing shared-ride efficiency pushes wages to extremes: if the current wage is high (low), increasing shared-ride efficiency pushes the wage higher (lower). We provide a sharp characterization of whether shared-ride efficiency and labor supply are complements or substitutes. Managerial implications: Our results inform a platform's decision of whether to invest in improving shared-ride efficiency, as well as how to change its service offering and wage as shared-ride efficiency improves.