A real-time cooperation mechanism in duopoly e-hailing markets

In a competitive e-hailing market, each participating platform can only utilize a portion of the total demand (passengers) and supply (drivers), in which this fragmentation leads to market inefficiencies. Therefore in this study, we propose a decentralized dynamic cooperation mechanism, inspired by capacity-sharing strategies, between two platforms to mitigate market fragmentation. With the proposed mechanism, the platforms can offer to (i) refer their passengers and (ii) temporarily (for a single trip) lease idle vehicles to the other platform, at varying optimized prices. In its essence, whenever a platform is under-supplied while the other platform is over-supplied in a localized area, the proposed mechanism could help the platforms bridge their supply and demand. The proposed mechanism is constructed as an optimization problem incorporated in the batch-matching algorithm. We test the proposed cooperation mechanism in a disaggregated dynamic model. We consider multiple scenarios, which include symmetrical and asymmetrical duopolies. The performance of the proposed cooperation mechanism is compared to equivalent non-cooperative duopolies and equivalent monopolies. We show that the proposed cooperation mechanism leads to simultaneous improvements in all performance indicators for all stakeholders (passenger pickup time, passenger cancellations, driver income, and platform profitability) compared to equivalent non-cooperative duopolies. Additionally, the proposed cooperation mechanism is shown to be especially effective as the asymmetry between the duopoly increases.