Recruiting without‐car drivers through multiple sources: the impact on a ride‐sharing platform's driver surplus and consumer surplus

Abstract

AbstractRecently, ride‐sharing platforms have started to recruit not only with‐car drivers but also without‐car drivers. Without‐car drivers can directly rent cars from a ride‐sharing platform that operates its own fleets, which requires the platform to pay operating costs to manage the vehicles (self‐operated drivers) or rent cars from a car‐rental company that cooperates with the platform (rental drivers). This paper builds a stylized model to examine the impact of recruiting without‐car drivers on a platform's driver surplus, consumer surplus, and profit. We assume that a ride‐sharing platform first decides to recruit either with‐car drivers or both with‐ and without‐car drivers. Then, the platform sets a price charged to customers, a wage paid to drivers, and a rental fee charged to self‐operated drivers. Customers decide whether to order on a ride‐sharing platform based on the price and network externality term, while drivers choose to provide services according to the wage, rental fee charged by the platform or car‐rental company, and utilization rate. We find that when the platform recruits with‐car drivers (recruits with‐ and without‐car drivers), supply and demand are matched when the potential number of with‐car drivers is relatively small (large), while supply exceeds demand when the potential number of with‐car drivers is large (small). Moreover, when a ride‐sharing platform changes to recruit with‐ and without‐car drivers, the platform and customers always become better off, while drivers may not. Specifically, when the operating cost is relatively low or high (moderate), the drivers become better (worse) off.