Marketing

Pricing strategies

Engineering

Psychoanalysis

Pure mathematics

Service (business)

Microeconomics

Dynamic pricing

Dimension (graph theory)

Economics

Computer science

Business

Operations research

Psychology

Mathematics

Compensation (psychology)

Profit (economics)

Operations Research

Motivated by the prevalence of ride-sharing platforms, in “Spatial Pricing in Ride-Sharing Networks,” Bimpikis, Candogan, and Saban explore the impact of the demand pattern for rides across a network’s locations on a platform’s optimal pricing and compensation policy, profits, and consumer surplus. They explicitly account for the pricing problem’s spatial dimension and the fact that the drivers endogenously determine whether and where to provide service. Their first contribution is to develop a tractable model to study a platform operating on a network of locations that may differ in both the size of their potential demand and the destination preferences of riders. Second, they provide a characterization of the platform’s optimal policy and identify “balancedness” of the demand pattern as a property that captures the profit potential of a given network. Finally, they discuss the benefits and limitations of a number of alternative pricing and compensation schemes.

Spatial Pricing in Ride-Sharing Networks