Dynamic pricing model for cruising taxicab based on system dynamics

• Main Authors: Yu-Ming Jin, Xiao-Fei Ye, Wen-Li Liu, Tao Wang, Haizhong Wang
• Format: Article
• Language: English
• Published: SAGE Publishing 2019-02-01
• Series: Advances in Mechanical Engineering
• Online Access: https://doi.org/10.1177/1687814019827111

The cruising taxi industry has been greatly impacted by the development of the ride-hailing taxi services like the Didi and Uber. The service orders of cruising taxis fell 35% or more. To intervene the conflicts between the cruising and ride-hailing taxis, system dynamics model of cruising taxicab price was proposed by considering the competitive relationships between online ride-hailing and cruising taxis. The proposed model was calibrated and validated by the taxi operational data in Ningbo. Simulation experiments were designed to explore the impact of the cruising taxi price changes on the balance of market supply and demand. Simulations were divided into two scenarios: one was under the different levels of supply and demand at peak and low peak; the other was under the different proportions of ride-hailing taxi. The results indicate that (1) the market supply and demand are close to equilibrium during peak hours when the price increases by ¥0.6 per kilometer. The increased price can reduce the peak demand level effectively and also increase the total earning of cruising taxis; (2) when the service order ratio of cruising taxis to ride-hailing taxis accounts for about 10:4.5 and 10:8, the price increases by ¥0.6 per kilometer and decreases by ¥0.4 per kilometer to achieve the equilibrium of demand and supply, respectively. That is, when the cruising taxis have an advantage over the ride-hailing taxis, the price of cruising taxis should be raised to gain more benefits. Instead, the cruising taxis price should be decreased to improve their competitiveness.