Characterization of attractive and provider-bounded subsidy contracts

Characterize which transportation contract shapes, given a target subsidy and a specified tolerance for selection, are both attractive to riders and bounded in cost for the provider, extending beyond guarantees, capped memberships, and fixed per-ride discounts.

Background

The paper compares three transportation-product designs: capped-fare guarantees, capped memberships, and fixed per-ride discounts. It argues that contracts conditioning weakly on route, time, or realized fare can expose the provider to adverse selection, whereas additive per-ride subsidies preserve riders’ marginal incentives and impose a deterministic upper bound on liability.

The authors identify a broader unresolved design problem concerning the tradeoff between rider attractiveness and provider exposure. They leave open the task of characterizing the full spectrum of contract forms between these examples, subject to a target subsidy and a specified tolerance for selection.

References

Most promising, the additive-subsidy result points toward a broader design question: given a target subsidy and a tolerance for selection, which contract shapes are both attractive to riders and bounded for the provider? The guarantee, the capped membership, and the fixed per-ride discount are three points on that spectrum; characterizing it fully is left to future work.

— Pricing rides as option contracts: guarantees and memberships under travel-time uncertainty  (2609.04618 - Elmasri et al., 4 Sep 2026) in Section Discussion