Government regulations for ride-sourcing services as substitute or complement to public transit

Abstract

The rapid expansion of on-demand ride-sourcing services has revolutionized the landscape of multi-modal urban transport systems, particularly with regard to the public transit system. Ride-sourcing services can be either a substitute or complement to public transit. Regarding the complementary effects, ride-sourcing services can address first/last-mile problem to enhance public transit ridership, which aligns with the objective of the government to coordinate multiple travel modes. In this paper, we establish a mathematical model to characterize the complementary and substitution relationships between ride-sourcing and public transit services. Three market scenarios are compared and analyzed, including the laissez-faire market without government intervention, the market under a price-cap regulation, and the market under a subsidy policy. The insights could help understand how government regulations affect ride-sourcing platforms’ profit-pursuing decisions and the resulting social benefits, such as public transit ridership. Finally, we offer practical suggestions for the government to design the appropriate regulations to better coordinate ride-sourcing and public transit services, under situations with different demand-supply ratios. We prove that when the demand-supply ratio is high enough, it is unnecessary to introduce any regulation to promote public transit, whereas at a medium ratio, the government is able to set a critical value of decision variables in each policy such that all travelers use public transit.