Optimal pricing in ride-share platforms

Abstract

Ride-share platforms are contemporary businesses that match passengers with drivers, unlike taxis that can be hailed from the street. In the literature, the problem of optimizing the operations of such companies is mostly considered in static settings. We use in this paper a dynamic model and propose differential equations to model the evolution of the system. The objective is to maximize the profit during the planning horizon. Using optimal control theory, we determine the optimal rate of change in the ride price rate. An illustrative example along with sensitivity analyses shows the effect of the system parameters on the optimal solution obtained.

Keywords:

• ride-sharing
• optimal control
• optimal pricing

Acknowledgments

The authors would like to thank the reviewers for carefully reading the paper and making numerous suggestions for its improvement.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Data availability statement

Data sharing is not applicable to this article as no new data were created or analyzed in this study.