Smart technology drives the sharing economy

Smart technology drives the sharing economy

This blog post summarizes a larger article written by University of Michigan faculty member Saif Benjaafar's research on smart technology. It specifically focuses on his analysis of ride-sharing companies.

Key findings

They do dynamic pricing, so they sense in real time what the supply of drivers is and what the demand of customers is, and then they price accordingly using sophisticated algorithms. A lot of the work I do is in that area—how should a platform set prices as supply and demand change in time and in space. That’s one notion of "smartness."

“Another notion is matching. Which drivers do you match with which rider? Do you pull the trigger and match [the first available driver to the rider] or do you wait for a better match? If you wait too long you could lose the rider,” he said—and drivers don’t want to be idle for too long, either, because they’re not earning money then.

It’s a balancing act, Benjaafar said. “There’s a possibility that everybody wins—that consumers benefit because now they can fulfill their needs without the hassle of ownership, and the service provider benefits by monetizing an expensive asset.” But there’s also the potential for overconsumption, he explained, again using car-sharing as an example. Consumers who might otherwise walk, bike, or use public transit may choose to drive when that choice becomes accessible.

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