Drivers’ Welfare and Pollutant Emission Induced by Ride-Hailing Platforms’ Pricing Strategies

We build two multiple-stage game-theoretical models to capture how a ride-hailing platform’s ex-ante and ex-post pricing strategies induce show-up drivers’ strategic inter-area relocations. In both models, the platform operates its ride-hailing service in a two-area city, where the realizations of ride-hailing demand and supply are spatially asynchronous. Based on the subgame perfect equilibria, we show that show-up drivers’ relocation equilibria induced by the platform’s pricing strategy are not unique but that the equilibrium multiplicity does not affect the platform’s profit. Further, we find that the commission rate has non-monotonic discontinuous impacts on the platform’s profitability, drivers’ welfare, and pollutant emission under both pricing strategies. The continuous impact of an increase in the commission rate leads to a win–loss outcome for the platform and drivers without any effect on the environment, while the jumps result in a loss–win–win outcome for the platform, drivers, and the environment. We finally reveal that, relative to the ex-ante pricing strategy, the ex-post pricing strategy always benefits the platform at the cost of environmental pollution and enhances (reduces) drivers’ welfare when the relocation cost is sufficiently low (high). Managerial insights are also discussed.