Evolutionary Game between Government and Ride-Hailing Platform: Evidence from China

Abstract

The ride-hailing industry is a new business form that combines traditional taxi services with Internet technology and a sharing economy. However, after its emergence, countries have focused on finding ways to regulate this industry. The regulation of ride-hailing has gone through three stages: from denial of negation to laissez-faire and prudential supervision. This study focuses on the market regulation of the ride-hailing industry, discusses whether ride-hailing platforms require strict regulation under the current Internet setting, and provides evidence for this problem from the perspective of evolutionary game theory between the behavior of the government and the platforms. This study argues that both ride-hailing platforms and the government are evolutionary game players with bounded rationality, constantly adjusting their strategies through confrontation, dependence, and restriction. Therefore, this study constructs a two-dimensional game model between the government and ride-hailing platforms and analyzes the stability strategies of the two participants in different scenarios, to clarify the game behavior and the game return matrix. Assuming that loose government regulation and the standard operation of the ride-hailing platforms are the optimal Pareto equilibrium of the game system, the study concludes that this optimal equilibrium cannot be achieved under the current conditions. Through parameter analysis and sample simulation calculations, the system can be directed toward this equilibrium by reducing government supervision cost and increasing government punishment. This provides a theoretical basis for the government to regulate the ride-hailing industry from the perspective of quantitative analysis. Related implications are finally proposed, which can help the decision-makers better understand the regulation countermeasures of the government and ride-hailing platforms.