Tuesday, January 3, 2012

The Passenger

The Passenger is the one paying in the Rideshare business model, so the savings to him must be enough to make the payment worthwhile. In order to calculate his payment, we need one piece of information we did not need for the Driver: the total distance traveled from home to work. This didn’t matter in the Driver’s case as he needed to travel that distance anyway. Only the marginal distance added by detouring to pick up the passenger matters to the driver. But since the Passenger’s payment to the Driver will reflect the total distance traveled, we need to know how far they go.

The average corporate commute in the city of Los Angeles is about 20 miles. We know this from both the personal experience of Rideshare management and the results and research of other carpooling companies. We will use this average for now.

Although the mileage price will be determined in a free market transaction between the driver and passenger,  we can make an educated inference about the price. Since the IRS budgets mileage at $0.50 per mile, that is the number we will use for now. (I mean, if it’s good enough for the government…..)
At $0.50 per mile round trip x 20 miles per trip, the Passenger’s payment is $10 per day. Less than a cab fare, but a substantial expenditure nonetheless. Do the benefits to the Passenger justify this expense?

First, let’s calculate his direct savings. The Passenger saves on the gas to drive 40 miles per day, which given time spent stuck in traffic is even more than the mileage of his car would suggest. According to the Consumer Energy Center, an idling car consumes about half a mile of gas per minute. Assuming passenger drives a fuel-efficient vehicle that gets 30 miles per gallon, and also assuming that Passenger spends equal amounts of time moving and idling, idling on a 60 mph highway(average of 55 mph and 65 mph) for half the time on a 20 mile commute means adding the equivalent of 10 miles to the trip in gas costs alone. At $3.90 per gallon, which is the cost at my local L.A. gas station as of November 20th 2011, this means the gas costs of a round trip are equal to $7.80 per day for the Passenger. These are costs he has saved by paying someone else to drive him.

This is less than $10 though. Does that mean that the Passenger won’t use Rideshare? Hardly. Add on the costs of parking, for starters, which in L.A. will be $7-10 if you’re lucky and up to $20 if you’re not. In parking and gas costs alone, you are well above the cost of using Rideshare’s service. We won’t even go into the benefits of reducing wear and use on the Passenger’s car and the more enjoyable and productive  time he spends not having to sit behind the wheel, but instead sleeping, chatting with friends, getting an early start on work, etc.
Next, the Rideshare company itself.

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