Optimizing Pricing, Repositioning, En-Route Time, and Idle Time in Ride-Hailing Systems

Abstract

In ride-hailing systems, en-route time refers to the time that elapses from the moment a car is dispatched to pick up a rider until the rider is picked up. A fundamental phenomenon in ride-hailing systems is that there is a trade-off between en-route time and the time that a car waits for a dispatch. In short, if cars spend little time idle waiting for a dispatch, then few cars are available when a rider makes a request, and thus the mean distance between a rider and the closest available car is long, which means that en-route time is long. This phenomenon is of great importance in ride-hailing, because en-route time increases rapidly as the number of idle cars decreases, and every minute that a car spends en-route is one minute less that the car can transport riders. In spite of this, the existing literature on price optimization for ride-hailing, and on repositioning optimization for ride-hailing, ignores en-route time. Initial attempts to take this trade-off for the mean en-route time into account when considering price optimization or repositioning optimization all resulted in intractable optimization problems. Then we found a way to reformulate a simultaneous price and repositioning optimization problem, that takes this trade-off for the distribution of en-route time into account, as a tractable convex optimization problem. We show how the optimal solution can be used to construct policies that perform much better in simulations than the policies proposed in previous papers.