Host: John Baras
We evaluate the impact of proposed regulations of transportation network companies (TNCs) like Uber, Lyft and Didi: (1) a minimum wage for drivers, (2) a cap on the number of drivers or vehicles, (3) a congestion surcharge. The impact is assessed using a queuing theoretic equilibrium model, which incorporates the stochastic dynamics of the app-based ride-hailing matching platform, the ride prices and driver wages established by the platform, and the incentives of passengers and drivers. We show that a floor placed under driver earnings pushes the ride-hailing platform to hire more drivers, at the same time that passengers enjoy faster and cheaper rides, while platform rents are reduced. Contrary to standard economic theory, enforcing a minimum wage for drivers benefits both drivers and passengers, and promotes the efficiency of the entire system. This surprising outcome holds for a large range of model parameters, and it occurs because the quality of service measured by passenger pickup time improves as the number of drivers increases. In contrast to a wage floor, imposing a cap on the number of vehicles hurts drivers, because the platform reaps all the benefits of limiting supply. We also construct variants of the model to discuss platform subsidy, platform competition, and autonomous vehicles.
Pravin Varaiya is a Professor of the Graduate School in the Department of Electrical Engineering and Computer Sciences at the University of California, Berkeley. He has been a Visiting Professor at the Institute for Advanced Study at the Hong Kong University of Science and Technology since 2010. He has co-authored four books and 350+ articles. His current research is devoted to transportation networks and electric energy systems. Varaiya has held a Guggenheim Fellowship and a Miller Research Professorship. He has received three honorary doctorates, the Richard E. Bellman Control Heritage Award, the Field Medal and Bode Lecture Prize of the IEEE Control Systems Society, and the Outstanding Researcher and Lifetime Achievement Awards from the IEEE Intelligent Transportation Systems Society. He is a Fellow of IEEE, a Fellow of IFAC, a member of the National Academy of Engineering, and a Fellow of the American Academy of Arts and Sciences.