The Costs and Benefits of Sharing: Sequential Individual Rationality and Sequential Fairness

Abstract

In designing dynamic shared service systems that incentivize customers to opt for shared rather than exclusive service, the traditional notion of individual rationality may be insufficient, as a customer's estimated utility could fluctuate arbitrarily during their time in the shared system, as long as their realized utility at service completion is not worse than that for exclusive service. In this work, within a model that explicitly considers the "inconvenience costs" incurred by customers due to sharing, we introduce the notion of sequential individual rationality (SIR) that requires that the disutility of existing customers is nonincreasing as the system state changes due to new customer arrivals. Next, under SIR, we observe that cost sharing can also be viewed as benefit sharing, which inspires a natural definition of sequential fairness (SF) - the total incremental benefit due to a new customer is shared among existing customers in proportion to the incremental inconvenience suffered. We demonstrate the effectiveness of these notions by applying them to a ridesharing system, where unexpected detours to pick up subsequent passengers inconvenience the existing passengers. Imposing SIR and SF reveals interesting and surprising results, including: (a) natural limits on the incremental detours permissible, (b) exact characterization of "SIR-feasible" routes, which boast sublinear upper and lower bounds on the fractional detours, (c) exact characterization of sequentially fair cost sharing schemes, which includes a strong requirement that passengers must compensate each other for the detour inconveniences that they cause, and (d) new algorithmic problems related to and motivated by SIR.