Rideshare
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- There are a number of potential drivers for a rideshare service. Each day:
- First, each driver simultaneously decides whether to drive
- Then, the day’s revenue per-hour driven announced to all
- The more drivers, the lower the revenue per hour
- Finally, each of those driving chooses how many hours to drive
- Those not driving can calcuate what their profits would have been
- Use the profit calculator to predict whether driving will be profitable
- As you change the predicted number of drivers, revenue per hour changes
- Note: The number of drivers includes yourself
- For a given revenue per hour, you see how profit varies with hours driven
- Choose whether to drive
- When all have chosen, revenue per hour driven announced
- Yes Drive: choose how many hours to drive
- No Drive: check whether driving would have been profitable
- No Drive: Payoff=0 for the day
- Yes Drive: Payoff= Revenue - Fixed Cost - Variable Costs
- Revenue: Revenue per hour × hours driven
- Fixed Cost: If you choose to drive, you pay this cost.
- Variable Cost: Each hour you drive is costly. Variable costs are the sum of these Marginal costs.
- Fixed Cost equals $20
- Marginal cost of first hour: $1
- Marginal cost of second hour: $3
- Marginal cost of third hour: $5
- Marginal cost of fourth hour: $7
- You drive 3 hours when revenue per hour is $9
Revenues |
– |
Fixed Cost |
– |
Variable Costs |
= |
Profit |
(3 × $9) |
– |
$20 |
– |
($1 + $3 + $5) |
= |
-$2 |