A pricing mechanism to improve capacity utilisation in ridesharing

Abstract

Low vehicle occupancy is an issue faced by many ridesharing platforms. One of the ways to address this issue is to design a pricing mechanism that incentivises riders to join large-size pools. In this study, we propose a pricing mechanism and a decision rule to aid the platforms in achieving high capacity utilisation (forming large-size pools), even in the presence of rider inconveniences. We factor inconveniences due to both detouring and sharing of personal space while designing the mechanism. The proposed mechanism incentivises riders to join the “largest-size”pool and also ensure that no rider benefits at the cost of others. The decision rule helps to identify the right participants to share a ride. We employ cooperative game theory for this study.