Price, Commission Rate, and Security Investment Effort for on-Demand Ride-Hailing Platforms

Abstract

Faced with rider/driver concerns about the security of ride-hailing services, on-demand ride-hailing platforms, such as DiDi, Uber, and Grab, have been investing in security to reduce their perceived security risk (PSR). These platforms have several investment choices: investing in security on the demand side (Case C), investing in security on the supply side (Case D), and investing in security on both sides (the demand side and the supply side) (Case CD). This paper considers an on-demand service platform and studies optimal pricing and security investment effort under different choices considering different rider and driver types. To explore the impact of security investments on the platform, riders, and drivers, we also analyze a scenario without security investments (Case N). The results show that the service price under Case C is always higher than that under Case N, while the service price under Case D is always lower than that under Case N. The relationships between service prices under Case CD and the other scenarios are influenced by the PSR sensitivity of service price-sensitive riders, the proportion of PSR-sensitive riders, and the cost coefficient of the supply side. The commission rates under security investments are always smaller than the commission rate under Case N. We also find that security investments have different impacts on the platform, riders, drivers, and society. In addition, we extend our model to multiple situations to check the robustness of our main results.

Keywords

On-demand ride-hailing platform / service price / commission rate / security risk / security investment effort

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RIGHTS & PERMISSIONS

Systems Engineering Society of China and Springer-Verlag GmbH Germany