On Rider Strategic Behavior in Ride-Sharing Platforms

TL;DR

This paper explores how rider strategic behavior, such as walking outside surge zones, influences ride-sharing market dynamics, demand distribution, and surge pricing, revealing significant spillover effects and potential for demand balancing.

Contribution

It provides the first detailed analysis of rider strategic actions and their impact on surge pricing and demand distribution in ride-sharing platforms.

Findings

Rider behavior causes demand spillover to adjacent zones.

Strategic rider actions can reduce surge prices.

Demand balancing improves market efficiency.

Abstract

Over the past decade, ride-sharing services have become increasingly important, with U.S. market leaders such as Uber and Lyft expanding to over 900 cities worldwide and facilitating billions of rides annually. This rise reflects their ability to meet users' convenience, efficiency, and affordability needs. However, in busy areas and surge zones, the benefits of these platforms can diminish, prompting riders to relocate to cheaper, more convenient locations or seek alternative transportation. While much research has focused on the strategic behavior of drivers, the strategic actions of riders, especially when it comes to riders walking outside of surge zones, remain under-explored. This paper examines the impact of rider-side strategic behavior on surge dynamics. We investigate how riders' actions influence market dynamics, including supply, demand, and pricing. We show significant impacts, such as spillover effects where demand increases in areas adjacent to surge zones and prices surge in nearby areas. Our theoretical insights and experimental results highlight that rider strategic behavior helps redistribute demand, reduce surge prices, and clear demand in a more balanced way across zones.