An incentive strategy for the retention of impatient passengers in ride-sourcing markets

Abstract

A prominent problem plagued the ride-sourcing service providers is the instantaneous real-time demand-supply imbalance. This entails terrible user experience and causes adverse sustainable results such as customer churn for the platform, which will damage both drivers’ income and the platform revenue. To reduce passengers’ abandonment due to long waiting time by improving their waiting experience, we propose an incentive-based queue management strategy— a discount method— to retain passengers in a post-peak period. We regard the waiting process for a ridesourcing service as an M/M/c+M queue system with impatient passengers, and model passengers’ reneging behaviors by characterizing the impact of waiting discounts and updated queue information on their travel utilities. Based on such a behavior model, we can analyze the effect of discount strategy on the queuing process which allow us to maximize the platform’s profit growth by tailoring the discount strategy. Our result shows that the discount strategy can effectively increase the platform profit. Under the specific condition of the discount strategy, the earlier the strategy is implemented in the post-peak period, the higher platform profit can be achieved. Keywords: ride-sourcing market; queueing process; discount strategy; reneging behavior