On the Supply of Autonomous Vehicles in Platforms

Problem definition: The ongoing large-scale deployment of autonomous vehicle (AV) technology has the potential to fundamentally change the transportation landscape. Due to the high cost of AV hardware, the most likely path to widespread AV use is via platforms that can sustain high utilization, such as ride-hailing and delivery services. Our work studies the incentives of stakeholders in such deployments, possible misalignments, and contracting solutions to overcome them. Methodology/results: We consider four potential operational models to commercialize AVs, which we model as a supply chain game between a platform, an AV supplier, and human individual contractors (ICs), including (1) an open platform in which the AV supplier and ICs bring their own vehicles to the system, (2) an AV-supplier operated platform without ICs, (3) a platform that sources AVs through leasing contracts, and (4) an integrated supply chain. We find that except for the AV-only platform, all deployment models are subject to a risk of AV underutilization due to the need to maintain the ICs’ utilization sufficiently high to ensure ICs remain engaged. As AV underutilization propagates in a nonintegrated supply chain, an open platform can become arbitrarily worse than supply chain integration, and careful usage commitments are needed to overcome the efficiency loss. Managerial implications: This paper identifies a new kind of supply chain misalignment that is likely to emerge as AVs become deployed technology, which both platform operators and AV suppliers should be mindful of. Moreover, we demonstrate the value of usage commitment in the deployment of AVs through an open platform, which makes it more efficient than AV-only/AV leasing platforms.

History: This paper was selected as part of the 1RR initiative between the M&SOM Journal and the MSOM Society. This particular paper was part of the 2024 MSOM Service Operations SIG Conference.

Supplemental Material: The online appendix is available at https://doi.org/10.1287/msom.2024.1175.