Towards sharing economy 2.0 with autonomous vehicles? Modeling the impact of COVID-19 on the e-hailing taxi service industry

With the advent of COVID-19, urban transportation has been severely disrupted. We develop a stylized analytical model to study the effect of COVID-19 on the optimal pricing and hygiene level decisions of e-hailing taxi services, which play a crucial role in urban transportation. We analyze whether autonomous vehicles can aid the e-hailing taxi firms to sustain operations during these troubled times. In particular, we provide conditions under which the e-hailing taxi firms should collaborate with an original equipment manufacturer to introduce autonomous vehicles for urban transportation. Owing to the high fixed cost associated with acquiring autonomous vehicles, the e-hailing taxi firms intend to collaborate with an original equipment manufacturer. If the e-hailing taxi firm obtains a significant share from each ride in its collaboration, the hygiene level with autonomous vehicles is always greater than the hygiene level without autonomous vehicles, which is vital during the pandemic. With respect to the question of whether the e-hailing taxi firm should collaborate with the original equipment manufacturer to introduce autonomous vehicles from consumers’ viewpoint, we surprisingly find that the consumers are better off when the autonomous vehicles are introduced without collaboration both in the short-run and the long-run. However, given the high fixed cost of introducing autonomous vehicles, the e-hailing taxi firm will find it profitable to collaborate with an original equipment manufacturer if and only if its share from each ride is significant enough.