This study extends taxi models with an explicit consideration of perceived profitability and nonlinear fare structure. The expected profit is defined as the profit per unit time (inclusive of both occupied and vacant taxi times) that a taxi driver expects to receive from picking up a customer in a particular zone or location. It has great impact on taxi driver’s location choice in search of customers. The fare structure will directly govern the profitability of taxi rides of different lengths. With these explicit considerations, the extended model is intended to simulate the market effects of adopting a nonlinear fare structure with a diminishing fare rate per unit distance. The proposed nonlinear fare structure could potentially tackle the problem of taxi fare bargaining for discounts...[ Read more ]

This study extends taxi models with an explicit consideration of perceived profitability and nonlinear fare structure. The expected profit is defined as the profit per unit time (inclusive of both occupied and vacant taxi times) that a taxi driver expects to receive from picking up a customer in a particular zone or location. It has great impact on taxi driver’s location choice in search of customers. The fare structure will directly govern the profitability of taxi rides of different lengths. With these explicit considerations, the extended model is intended to simulate the market effects of adopting a nonlinear fare structure with a diminishing fare rate per unit distance. The proposed nonlinear fare structure could potentially tackle the problem of taxi fare bargaining for discounts largely due to the current linear fare structure. Analysis of sensitivity of social welfare gain and profitability as well as taxi/customer waiting times is conducted with respect to the parameters in the nonlinear fare structure.