What is the most efficient way to move humans around cities and the world? Finding answers to this question has motivated Garrett van Ryzin throughout his career. Transportation is a basic human need says the recently appointed Professor of Operations, Technology and Information Management at Cornell Tech and the Cornell SC Johnson College of Business.
Working with global companies, including major airlines and most recently Uber Technologies, van Ryzin has tackled an array of complex issues in transportation from routing to pricing.
“You’re trying to move people through space and time and I find it quite fascinating, just in terms of the physics of how it works,” he explains, “If you can do a good job of it and make it more efficient, that really adds value to the world.”
Co-author of a pioneering scientific book on revenue management, ‘The Theory and Practice of Revenue Management,” van Ryzin is a leading figure in operations research, and has also applied his critical thinking to areas such as distribution, retailing, and manufacturing.
Pricing for Complexity
Since earning his Ph.D. in Operations Research from MIT in 1991, van Ryzin has worked in both industry and academia. Prior to joining Cornell Tech, he was on the faculty of Columbia Business School. One of his principal areas of research has been algorithmic pricing, which combines data-driven technology with economic behavioral modeling.
“Some of my work is on incorporating economic models of purchase behavior, and choice behavior, into algorithmic pricing models,” he explains.
His work on origin-destination network pricing has helped airlines decide what prices to make available on different routes where there are multiple variables, including fare classes and connections, in a network of flights. Traditionally, price points were set on a leg-by-leg basis, but origin-destination networks pricing is far more complex. Given the number of origin and destination cities, “you can literally have hundreds of thousands of these origin-destination combinations in a network,” van Ryzin said.
Dynamic Pricing for Radical Transportation Models
Over his career, van Ryzin has witnessed rapid advances in technology and the birth of new transportation models. One of the most ground-breaking has been Uber Technologies, where van Ryzin is Head of Marketplace Optimization Advanced Development.
Uber runs as a market place, he explains, and the company’s drivers have a lot of flexibility to work when and where they want. This, combined with a volatile demand pattern, calls for a radical form of dynamic pricing to ensure efficiency of service.
Airlines focus on managing demand. They can schedule planes and have control over capacity. Uber, on the other hand, is a two-sided market made up of riders and drivers, who affect both supply and demand.
“At Uber, we don’t control the drivers. They sign up to work for Uber, they’re free to come on and drive whenever they want. They’re free to drive wherever they want. And so, you’re really pricing on both the supply and demand side.”
Drawing on sophisticated data generated instantly via users´ mobile apps, Uber can map where drivers and riders are. Dynamic pricing then encourages drivers to go to the right places and work at the right times, explains van Ryzin.
“You’re updating the prices almost minute-by-minute based on the local supply and demand conditions in different parts of the city.”
By raising prices where cars are scarce, for example, drivers are encouraged to move into those parts of the city, which in turn creates a more reliable and efficient service.
“It incentivizes drivers to rebalance and reallocate themselves to areas where the demand is really needed. And it incentives riders with the flexibility to wait or travel by other modes to choose these alternatives.”
It is van Ryzin´s interest in working in this dynamic space at the intersection of technology and economics that drew him to Cornell Tech.
Breaking the Mold
In his new post at Cornell Tech, van Ryzin will continue his research on tech-enabled innovations in transportation — he is currently interested in autonomous, or driverless, vehicles — and will also teach a course in Operations Management, a course focused on the processes and strategic choice firms make convert their inputs into outputs.
“I really like what Cornell Tech is doing in terms of focusing on the tech sector and on industries that are super innovative, and then producing research that’s oriented around those industries.”
Most operations courses are heavily focused on manufacturing and distribution, he explains. While van Ryzin still intends to teach the classic topics of operations, Cornell Tech gives him an “amazing” opportunity to switch that orientation to companies working in the technology space.
“I think [industry is] the most exciting it’s ever been right now,” he says, “Tech companies are just so willing to break the mold and do things in a radically different way.”