Ride-sourcing platforms thrive on socio-economic inequality

Limited market share data suggests that ride-sourcing platforms may thrive in environments characterized by socio-economic inequality. This phenomenon is likely due to the availability of cheap labor and a higher proportion of travelers willing to pay above-average prices for time savings and comfort.

To investigate this relationship, TU Delft researchers utilized an agent-based simulation model representing interactions between supply and demand in the ride-sourcing market, considering both within-day and day-to-day dynamics. The model accounts for travelers’ mode preferences based on their perception of time factors and job seekers’ decisions based on varying reservation wages.

The researchers conducted experiments covering a range of inequality levels, from perfect equality to extreme inequality, and examined different platform pricing strategies. The analysis revealed a significant positive correlation between socio-economic inequality and ride-sourcing market share. This trend arises from inexpensive labor and a clientele that values time efficiency, bolstered by network effects inherent in ride-sourcing markets.

The researchers observed that driver earnings are minimal in urban areas with pronounced socio-economic disparities, where drivers contend with high platform commissions and intense competition for passengers.

Source: TU Delft

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