Abstract

Recently, ride-hailing platforms have started buying vehicles and leasing them to drivers with and without cars to expand supplies and serve more customers, switching from asset-light to asset-heavy companies. Unlike the asset-light model, where the platforms can only induce with-car drivers to use their vehicles to provide services, if the platforms switch to the asset-heavy model, they have an extra supply source that allows both with-car and without-car drivers to rent vehicles. This paper studies the impact of this switch on a ride-hailing platform's profit, consumer surplus, and driver surplus. We consider a ride-hailing platform that decides whether to buy cars and sets a price charged to customers and a wage paid to drivers. Both customers and drivers are sensitive to the payment terms set by the platform and also to congestion in the system (given by the relative numbers of available customers and drivers in the market). Driven by these features, we find that under the asset-heavy model, as the car purchase cost increases, the platform should shift from inducing both with-car and without-car drivers to rent vehicles to inducing only without-car drivers. However, in the case where the car purchase cost is not too large, the platform should adopt the asset-heavy model, which allows both classes of drivers to rent vehicles, and choose the asset-light model otherwise. We further show that customers do not always benefit from the asset-heavy model because the corresponding total supply may be less than that of the asset-light model, leading to increased congestion. Additionally, we find that the with-car driver surplus of the asset-heavy model may be higher or lower than that of the asset-light model. Finally, if the cost is sufficiently small, when the number of potential without-car drivers is large or customers' sensitivity to congestion is large, we show that the asset-heavy model can increase platform profit, consumer surplus, and total driver surplus (i.e., the sum of with-car and without-car drivers' surpluses), resulting in a "win-win-win" outcome.