Differentiated Service Pricing Strategies for Ride-Hailing Considering Rational Inattentive Passengers

Abstract Considering the ambiguity of passengers’ perception of the real service level of ride-hailing, the heterogeneity of driver and passenger preferences for differentiated service modes, the frictions of driver and passenger matching, and the inter-group network externality caused by the scale of driver and passenger, this paper establishes a bi-level optimization model for the pricing strategies of differentiated services on ride-hailing platforms based on the theory of rational inattention. It explores the pricing mechanism of ride-hailing platforms under two optimization objectives (profit maximization and social welfare maximization) and three service strategies (providing both high and low differentiated services, providing a single low service, and providing a single high service). The upper level aims to maximize the profits of ride-hailing platform or social welfare, with service price and commission rate as decision variables. The lower level constructs a driver-passenger equilibrium choice model based on the theory of rational inattention. The model is solved using a combination of particle swarm optimization (PSO) algorithm and method of successive averages (MSA). The upper level model uses PSO algorithm to obtain differentiated service prices and commission rates, which are transmitted to the lower level. The lower level model uses the MSA to solve, and the obtained matching rate and maximum matching time of the driver are transmitted to the upper level. Numerical examples have verified the effectiveness of the model and algorithm. The results show that when passenger prior beliefs follow a uniform distribution, under three strategies, the platform profit shows a trend of first increasing and then decreasing with the increase of unit information cost. To ensure maximum profit, the platform should disclose the service information of ride-hailing as much as possible, but also maintain the unknownness of ride-hailing services appropriately. When the goal is to maximize social welfare, when the unit information cost is low, compared to providing a single service strategy, differentiated service strategy can better meet the differentiated choices of drivers and passengers, thereby ensuring higher social welfare. As the unit information cost increases, three strategies need to attract rational inattentive passengers to choose ride-hailing services by reducing service prices, thereby improving social welfare. The results can provide references for ride-hailing platforms in formulating pricing strategies for differentiated services.