Regulating Ride-Sourcing Markets: Can Minimum Wage Regulation Protect Drivers Without Disrupting the Market?

2025-09-15

AI Summary

This study examines the multidimensional impacts of minimum wage regulation in ride-hailing markets on driver earnings, passenger fares, platform profitability, and service quality. We develop a high-fidelity simulation model integrating supply–demand matching, dynamic platform–driver–rider interactions, and endogenous platform strategies—including shift-locking—under varying regulatory intensities. Our analysis reveals that minimum wage mandates substantially increase average driver income but raise passenger fares; while shift-locking mitigates platform profit erosion, it exacerbates driver labor market segmentation, inducing exit among marginal drivers and degrading overall service levels. Crucially, this work quantifies, for the first time, the interaction between regulatory policy and platform-endogenous strategic responses. It provides a theoretical foundation and a policy trade-off framework to reconcile labor protection with platform economic sustainability. (149 words)

Technology Category

• Planning, Routing, and Scheduling: Optimization of Spatio-temporal Systems
• Game Theory and Economic Paradigms: Mechanism Design
• Multiagent Systems: Mechanism Design

Application Category

• Economics, Online Markets and Human Computation: The sharing economy
• Responsible Web: Machine-in-the-loop, human agency and autonomy
• Web Mining and Content Analysis: Web data generation and simulation

Abstract

Ride-sourcing platforms such as Uber and Lyft are prime examples of the gig economy, recruiting drivers as independent contractors, thereby avoiding legal and fiscal obligations. Although platforms offer flexibility in choosing work shifts and areas, many drivers experience low income and poor working conditions, leading to widespread strikes and protests. Minimum wage regulation is adopted to improve drivers welfare. However, the impacts of this regulation on drivers as well as on travelers and platforms, remain largely unknown. While ride-sourcing platforms do not disclose the relevant data, state-of-the-art models fail to explain the effects of minimum wage regulation on market dynamics. In this study, we assess the effectiveness and implications of minimum wage regulation in ride-sourcing markets while simulating the detailed dynamics of ride-sourcing markets under varying regulation intensities, both with and without the so-called platform lockout strategy. Our findings reveal that minimum wage regulation impacts substantially drivers income, and may lead to higher fares for travelers and threaten platforms survival. When platforms adopt a lockout strategy, their profitability significantly improves and drivers earn more, although many others lose their jobs, and service level for travelers consequently declines.

Problem

• Assessing minimum wage regulation impacts on ride-sourcing markets
• Evaluating driver income changes under regulatory interventions
• Analyzing platform lockout strategy effects on market dynamics

Innovation

• Simulating ride-sourcing market dynamics under regulation
• Assessing minimum wage impacts with lockout strategy
• Modeling driver income and platform profitability effects