Strategic Driver Repositioning in Ride-Hailing Networks with Dual Sourcing

In ride-hailing markets, the spatial mismatch between supply and demand characterizes one of the most fundamental operational bottlenecks. The voluntary customer search of drivers is oftentimes inadequate for narrowing the demand-supply gaps and falls short in responding timely to the dynamic market conditions. To facilitate better supply management, some ride-sourcing platforms now adopt a dual-sourcing strategy by converting some freelance drivers as contractors, who would then follow platforms' guidance on repositioning movements when idle. This paper thus aims to analyze the implications of such a dual-sourcing strategy on the overall operations of ride-haling services. We consider a monopolistic platform that owns a blended workforce, with freelance drivers searching customers following their own preferences whilst contracted drivers repositioning in a centralized manner as system actuators. A mixed equilibrium model is devised to capture the interplay between the idle repositioning movements of both parties, and real-world data is invited to quantify the impacts of dual sourcing on various market sectors. Our numerical results confirm the effectiveness of dual sourcing in smoothing the operations, increasing the customer demand, and driving up the revenue of ride-hailing services. However, the benefit of dual sourcing to the platform remains sensitive to the proportion of contractors in the entire workforce as well as the stimulative commission beyond their regular service income