Operations and Regulations for a Ride-sourcing Market with a Mixed Fleet of Human Drivers and Autonomous Vehicles

The rise of autonomous driving may sharply reshape ride-sourcing markets by influencing drivers’ income and participation, customers’ choices, ride-sourcing platforms’ operations, and governments’ regulations. We introduce a model which characterizes a ride-sourcing market with a mixed fleet of non-atomic autonomous vehicles (AVs) and atomic human-driven vehicles (HVs). Human drivers decide whether and where to offer ride-sourcing services independently, while AVs are fully controlled and dispatched by the platform to serve on-demand ride requests that are distributed heterogeneously. We solve for the optimal platform operating strategy and examine the implications of different government regulations on the platform’s optimal decisions and the resulting market equilibrium. We find that the introduction of AVs can increase platform profit only when AVs’ maintenance cost is low regardless of the mass of human drivers; in contrast, it can enhance social welfare only when human drivers are insufficient and AVs’ maintenance cost is low. Although the emergence of AV always undermines human drivers’ welfare, it can simultaneously increase platform profit and social welfare in the initial phase of AV establishment (with a small AV fleet size). Moreover, by looking into the regulatory outcomes of a few prevailing regulations, we find that some improper regulations could be deleterious to all stakeholders because they result in an oversupplied market, where human drivers face severe competition and the platform has to afford unnecessary maintenance costs