New sources of economies and diseconomies of scale in on-demand ridepooling systems and comparison with public transport

TL;DR

This paper investigates the economic efficiencies of on-demand ridepooling systems, identifying key scale economies and diseconomies, and compares their performance with traditional public transport, highlighting the importance of flexible routing and walking options.

Contribution

It introduces a novel analysis of scale effects in on-demand ridepooling, including the impact of route flexibility and matching, and compares these with public transport systems.

Findings

Scale economies arise from demand growth and better route matching.

Diseconomies occur at high loads due to longer detours and flex-route effects.

Allowing walking options improves system performance and cost efficiency.

Abstract

On-demand ridepooling (ODRP) can become a powerful alternative to reduce congestion and emissions, if it attracts private car users. Therefore, it is crucial to identify the strategic phenomena that determine when ODRP systems can run efficiently. In this paper, we analyze the performance of an ODRP system, in which the fleet of low-capacity vehicles is endogenously adapted to the demand, and operated in a zone covered by a single transit line. The routing of the on-demand fleet follows some of the rules of public transport systems; namely, it is not-for-profit, some users can be required to walk, and all requests must be served. Considering both users' and operators' costs we identify two sources of scale economies: when demand grows, the average cost is reduced due to a) an equivalent of the Mohring Effect (also present in public transport), and b) due to matching users with more similar routes when they are assigned to the vehicles, which we call Better-matching Effect. A counter-balance force, called Flex-route Effect, is observed when the vehicle loads increase and users face longer detours. We find a specific demand range in which the latter effect dominates the others, imposing diseconomies of scale when only users' costs are considered. Such a phenomenon emerges because the routes are not fixed; hence, it is not observed in traditional public transport systems. However, when considering both users' and operators' costs, scale economies prevail. Our simulations show that relaxing door-to-door vehicle requirements to allow short walks is crucial for the performance of ODRP. In fact, we observe that an ODRP system with human-driven vehicles and walks allowed has a total cost at a similar level to that of a door-to-door ODRP system with driverless vehicles.