Taxi market equilibrium with discrete and continuously distributed value of time of customers

Abstract

The thesis investigates the equilibrium properties of taxi market considering heterogeneity in customers’ value of time (VOT). It is a fact that each traveler views the VOT differently, those with higher VOT would prefer a higher price instead of a longer waiting time than those with a lower VOT. Customers react distinctively dependent on their VOT, previous taxi models assumed an average VOT for all potential customers. This thesis investigates the impact of distinct customers’ VOT by applying more realistic VOT distributions i.e. discrete and continuous VOT distributions. We focused on exploring different evaluating schemes and market strategies by adopting money and time as standard units. Firstly, taxi market equilibrium under customers’ heterogeneity is examined by grouping them into discrete VOT customers groups, and it is found that realized customer demand is lower and taxi firms actually suffers a loss of more than vacant taxi hours without considering heterogeneity. While with time unit taken into account, taxi firms’ profit may lie in the positive region depending on the drivers’ VOT. Secondly, with the inclusion of continuously distributed VOTs of customers, it becomes possible to precisely calculate the realized customer demand and taxi fleet size which assists governments in providing accurate subsidy. This thesis can contribute worthwhile recommendations to regulators in selecting taxi fare and fleet size to address both firms and society benefits in light of heterogeneous VOT customers.

Date of Award	2015
Original language	English
Awarding Institution	The Hong Kong University of Science and Technology