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It works even better with high demand because it's easier to find multiple people traveling to/from the same places.
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In principle, but there are hard physical challenges such as the lack of space efficiency between a typical four occupant sized vehicle and a bus that holds some 10 or 20 fold more people on maybe only double the road footprint. Time to seek out your paired ridemates is something to consider, it melts away as you pack more people into the same vehicle and increases both in time as well as space as you start introducing more lower capacity vehicles.
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You're not comparing against real-world fixed-route bus routes.

In the real world, most bus routes run nearly empty if not completely empty most of the time, belching diesel smoke and paying a driver, in order to ensure that service is provided to remote locations and that service is made available on a regular schedule. In cities, utilization is usually higher, although you see the same pattern off-peak.

In suburban and rural environments, the footprint is nearly irrelevant, but the lack of riders means that early attempts would start with designs that prioritize battery capacity and range over the sheer number of seats. In urban environments, the final mix of buses will look closer to a combination of mid-size buses for door-to-door and full-size buses for trips that are door-to-door but in practice are no different from fixed-routes due to the sheer number of people who take the current routes at rush hour.

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