Operations and regulations for a ride-sourcing market with a mixed fleet of human drivers and autonomous vehicles

Abstract

The rise of autonomous driving may sharply reshape ride-sourcing markets by influencing drivers’ income and participation, customers’ choices, ride-sourcing platforms’ operations, and governments’ regulations. We introduce a model that characterizes a ride-sourcing market with a mixed fleet of non-atomic autonomous vehicles (AVs) and atomic human-driven vehicles (HVs). Human drivers decide whether and where to offer ride-sourcing services independently, while AVs are fully controlled and dispatched by the platform to serve on-demand ride requests that are distributed heterogeneously. We solve for the optimal platform operating strategy and examine the implications of different government regulations on the platform's optimal decisions and the resulting market equilibrium. Although the emergence of AV might undermine human drivers’ welfare, it can simultaneously increase platform profit, customer surplus, and social welfare. Moreover, by looking into the regulatory outcomes of a few prevailing regulations (i.e., price cap, minimum wage, minimum fleet size, and maximum fleet size), we find that the policymakers should determine the regulations according to the conditions of labor supply and the development stage of AV technology.