Speakers: Daniel Freund, MIT

Host: Prof. Jinhua Zhao, MIT

Abstract: The likely arrival of autonomous vehicle (AV) technology in the near future has the potential to fundamentally change the transportation landscape. Due to the high cost of AV hardware, the most likely path to widespread use of AVs is via open platforms that can sustain high-utilization, outsource the high capital burden, and complement the network with human drivers joining as individual contractors (ICs). In this talk, we describe a supply chain game between a platform, an outside AV supplier, and ICs. We show that such a setting is subject to a risk of AV underutilization that arises from the need to maintain a sufficiently high IC utilization for ICs to remain engaged. We show that in a decentralized supply chain, this can have a significant negative effect on the supply chain efficiency, with a potentially unbounded profit loss. We then study potential contracting solutions to overcome this inefficiency.

Full paper: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4178508