private and pooled rides

ISB faculty member Kashish Arora and his co-authors Fanyin Zheng and Karan Girotra explore how customers choose between private and pooled transportation while examining policies to ease traffic congestion and lower greenhouse gas emissions.

The growing demand for ride-hailing platforms like Uber, Lyft and Ola has transformed urban transportation in recent years. The widespread use of these platforms has made it easier for customers to navigate urban spaces but has also led to alarming levels of traffic congestion, exacerbating the climate crisis. For example, a study from California indicates that ride-hailing vehicles emit 40-50% more greenhouse gases than private vehicles. Similarly, data from New Delhi reveals that idling vehicles contribute over 6% of the city’s annual emissions.

In response to these challenges, cities have adopted a variety of strategies. Some have implemented congestion pricing to discourage excessive private vehicle use, while others have opted to ban ride-hailing services altogether. Meanwhile, many platform operators have introduced shared or pooled transportation options including carpooling and shuttle services, allowing users to book rides through mobile apps with guaranteed seating, unlike public buses. However, despite these innovations, many customers remain hesitant to switch from private cabs to pooled options.

In their paper “Private vs. Pooled Transportation: Customer Preference and Design of Green Transport Policy,” Arora and his co-authors analyse customer preferences for private cabs and shuttle services, examining how price and key service features influence customer choices. They also propose policies to incentivise customers to choose pooled transportation and suggest ways to reduce private vehicle use, thus lowering GHG emissions.

Data and Methodology

The authors undertook an empirical analysis of user rides data from Ola Cabs, a prominent ride-hailing service in India that began operations in 2010. With a market share of around 65% at the time of data collection, Ola serves hundreds of millions of users. This research focused on two service categories offered by Ola: on-demand cabs (private transport) and fixed-route shuttle services (pooled transport).

The data, gathered from New Delhi—a city grappling with traffic congestion and air pollution—included over 25 million cab rides and 1.28 million shuttle rides from 2016. An analysis of the data revealed that the average price of cab rides was significantly higher than shuttle rides. On average, the wait times for cab services in New Delhi was 11.34 minutes while the shuttle service required no wait. To develop a deeper understanding of factors that influence service choices, the authors also included granular geographical and demographic data in their study.

Using a discrete choice model to estimate demand and examine customer choices between the two services, the authors estimated preferences for price and service features, including wait time, travel time, travel distance, and walking distance to shuttle stops.

Key Findings

The authors estimated the monetary disutility—a measure of the amount a customer was willing to pay to avoid a negative experience—of different service features when choosing between private cabs and shuttle services.

• For instance, users in New Delhi were willing to pay an average of Rs 10 per minute (Rs 8.29 in the morning and Rs 11.72 in the evening) to avoid waiting for a private cab.
• Users were also willing to pay a premium to avoid longer trips. The monetary disutility of an extra kilometre was Rs 13.76 in the morning and Rs 10 in the evening.
• Users were less sensitive to travel time in shuttles compared to cab rides, suggesting that customers were willing to accept a slightly longer travel time if other features such as price or convenience were favourable.
• Most significantly, the authors found that customers were less likely to choose a shuttle service if they had to walk a significant distance to reach a shuttle stop. The monetary disutility of walking one kilometre to a shuttle stop was Rs 66 in the morning and Rs 84 in the evening. The distance to shuttle stops emerged as the most significant drawback of shuttle rides.

The authors then undertook counterfactual analyses to evaluate the impact of policies that would nudge customers to choose pooled rides over private cabs. The policies included reducing the commute for the shuttle service and imposing congestion surcharges on cabs during morning and evening hours. This analysis revealed that a 20% reduction in walking distance for shuttle rides led to a 1.56% decrease in Ola vehicles on the road in the morning and a 1.34% decrease in the evening as customers switched from private cabs to pooled options. This reduction in vehicles, according to the study, had the potential to cut greenhouse gas emissions by up to 4,800 tonnes annually.

The authors also compared the effectiveness of commute reduction policies to congestion surcharge policies commonly used to address urban congestion. They found that a 20% decrease in walking distance to shuttle stops could achieve 40% of the benefits of a 20% congestion surcharge policy. This suggests that commute reduction policies are a more cost-effective way to achieve similar outcomes without adding to the financial burden of customers.

Policy Implications

The study makes an important contribution to the growing body of knowledge on sustainable transportation, ride-hailing services, and the design of effective policies aimed at mitigating traffic congestion and promoting environmentally friendly transportation options.

The findings offer significant implications for policymakers, transportation providers and ride-hailing platforms. Insights from this study can help design effective green transport policies that encourage customers to use pooled options like shuttle services. The study also underscores the importance of service features, specifically walking distance to shuttle stops, in encouraging customers to switch to greener options. By strategically adding shuttle stops, transportation providers can reduce commute time, which could further enhance the convenience of pooled options. These operational improvements could be an effective alternative to congestion pricing.

Author: ISB Editorial Team