The Economics of Multi-Hop Ride Sharing

Abstract

Ride sharing allows to share costs of traveling by car, e.g., for fuel or highway tolls. Furthermore, it reduces congestion and emissions by making better use of vehicle capacities. Ride sharing is hence beneficial for drivers, riders, as well as society. While the concept has existed for decades, ubiquity of digital and mobile technology and user habituation to peer-to-peer services and electronic markets have resulted in particular growth in recent years. This paper explores the novel idea of multi-hop ride sharing and illustrates how information systems can leverage its potential. Based on empirical ride sharing data, we provide a quantitative analysis of the structure and the economics of electronic ride sharing markets. We explore the potential and competitiveness of multi-hop ride sharing and analyze its implications for platform operators. We find that multi-hop ride sharing proves competitive against other modes of transportation and has the potential to greatly increase ride availability and city connectedness, especially under high reliability requirements. To fully realize this potential, platform operators should implement multi-hop search, assume active control of pricing and booking processes, improve coordination of transfers, enhance data services, and try to expand their market share.