Getting Out of Your Own Way: Introducing Autonomous Vehicles on a Ride-Hailing Platform

Once autonomous vehicles (AVs) are deployed for ride-hailing platforms, human drivers will compete with AVs until AV costs decrease enough to eliminate human drivers entirely. We examine a ride-hailing platform’s strategy to recruit human drivers while operating a private AV fleet. Using a game-theoretic model, we analyze how the platform sets the human-driver wage and the size of its AV fleet. We show that setting a higher wage can surprisingly lead to less human-driver participation. Moreover, we show that having the option to augment its AV fleet after observing human participation levels can, counterintuitively, hurt the platform’s bottom line. Our findings emphasize the need for ride-hailing platforms to carefully navigate the complex interactions between their roles as supply providers (of AV-served rides) and supply seekers (of human drivers), as failure to do so can be costly.