A queueing model of dynamic pricing and dispatch control for ride-hailing systems incorporating travel times

A system manager makes dynamic pricing and dispatch control decisions in a queueing network model motivated by ride hailing applications. A novel feature of the model is that it incorporates travel times. Unfortunately, this renders the exact analysis of the problem intractable. Therefore, we study this problem in the heavy traffic regime. Under the assumptions of complete resource pooling and common travel time and routing distributions, we solve the problem in closed form by analyzing the corresponding Bellman equation. Using this solution, we propose a policy for the queueing system and illustrate its effectiveness in a simulation study.