The Effects of Subway Transit Expansion on Demand for Ridesharing Services

Problem definition: It is important to empirically examine the relationship between ridesharing and public transit systems. When making social overhead capital investments in urban transportation, such as investments in the expansion of subway lines, the relationship between ridesharing and public transit systems needs to be carefully considered. We examine how ridesharing services can complement and work together with the subway transit system when new subway lines open. Methodology/results: We study a natural experiment setting in which additional subway lines opened in Beijing, China, and utilize detailed ridesharing order information from a leading Transportation Network Company (TNC). By using the difference-in-differences framework, we find that ridesharing services complement the subway transit system. After the opening of new subway stations, the demand for ridesharing services traveling to and from subway stations significantly increases. Moreover, ridesharing services not only provide first-mile and last-mile connections to public transits for residents living close to subway stations, but also provide longer distance connections for residents living far away from subway stations. In addition, we find that the complementary relationship dominates for existing subway stations whereas the substitution relationship dominates for newly opened stations. By employing complex network theory, we find that newly opened subway stations generate ripple (spillover) effects on existing subway stations by changing the underlying network topological features of the subway system. Managerial implications: Managers in the ridesharing industry can employ our findings to explore different business strategies for commuters who rely on ridesharing services to connect to and from subway stations. Furthermore, findings have important implications for city planners and policymakers who formulate transportation policies and make urban planning decisions. In smart city operations, it is imperative to understand the relationship between the subway transit system and ridesharing services, especially in current times when the demand for ridesharing services has surged dramatically.