Understanding the Impact of TNC Pricing Strategies on the Prospect of Transit Agency-TNC Partnerships
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Transportation network company (TNC) trip prices have fluctuated significantly higher than they were two years ago, causing concerns about existing and planned partnerships between public transit agencies and private mobility service providers. This project explored three scenarios of future TNC price changes: (1) price trend extension based on forecasting models, (2) price increases in response to local policy changes, and (3) TNC/taxi price convergence due to increased competition. We then assessed the impacts of the price changes from each scenario on the prospect of transit agency-TNC partnerships, using a planned same-day-service (SDS) paratransit pilot project in the Seattle region as a case study. For the first scenario, we employed two time-series models, namely ARIMA and PROPHET, to forecast price changes within the next three years (October 2022- October 2025) based on publicly available TNC trip data from Chicago. The results showed that TNCs’ daily average price would reach up to $3.23 per mile, increasing by 40 percent from 2019 average rates. For the second scenario, we tracked significant policies that directly affected TNC prices in Seattle and incorporated reported price increases. The resulting estimations indicated that TNC prices would increase by an extra 25 percent in response to changes in the local minimum wage law. For the third scenario, we used publicly available taxi trip data from Chicago and forecasted future taxi prices by estimating time-series models comparable to those for TNC prices. The analysis suggested that because of increased competition, TNC and taxi prices could converge, and the average TNC fare per mile could increase by another 50 percent of the forecasted price if TNC and taxi prices become similar in the upcoming three years. By applying the three scenarios to the case of SDS in Seattle and considering a pre-determined $40 subsidy per TNC trip, our results showed that in the first scenario, the rate of trip diversion from ADA paratransit to TNCs, initially estimated at 70 percent based on TNC prices in 2019, would drop to 55 percent if the price trend extended over the upcoming three years. In the second scenario, the divertible trip rate could drop further to 51 percent to respond to local policy changes in Seattle. Finally, the divertible trip rate could be as low as 45 percent if TNC and taxi prices converge. This significant decrease in divertible trip rates could negatively affect the expected cost-effectiveness of transit agency-TNC partnerships. Although such partnerships could still provide many benefits, transportation planners and policymakers should carefully examine the significantly higher costs likely resulting from TNC business models and changing market and policy environments.