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Marriott Marquis, Carlsbad
Hosted By:
American Economic Association
Transportation
Paper Session
Sunday, Jan. 5, 2020 1:00 PM - 3:00 PM (PDT)
- Chair: Patrick McCarthy, Georgia Institute of Technology
Route-Based Price Discrimination of a Ride-Hailing Industry
Abstract
In this paper I examine the route-based price discrimination of Uber and its impact on social welfare. When demand functions are derived from logistic distributions of reservation prices only differing in their means, and when Uber realizes the distributions for each market, in theory, the price discrimination is more profitable than uniform pricing for Uber. Also, if the standard deviation of reservation ride fare is sufficiently low, then social welfare is higher with discriminatory pricing than with a uniform price. To empirically identify what the theory predicts, I employ OLS hedonic regressions by exploiting ride fare data for sampled trips from airports such as LAX, JFK, and SFO, to hotels around each airport. Trip routes are segmented by the room rate of hotels, assuming that passengers traveling to hotels with higher room rates have higher reservation price. Evidence is found suggesting that ride fare is charged higher by \$0.1 - \$0.54 for each \$100 increase in hotel room rate. This estimated relationship is consistent and significant even among hotels geographically matched within 0.1mile. These findings imply that ride fare of UberX is set differently for each route in the process of profit maximization of Uber, and taken together with the prediction of theory, the price discrimination could be considered as a welfare-improving pricing scheme when the given conditions hold.Stuck in Traffic: Measuring Congestion Externalities with Negative Supply Shocks
Abstract
Traffic is an increasingly complex issue around the world. The fact that most cities do not charge Pigovian taxes on road usage or use other congestion pricing schemes implies that these congestion costs are higher than their socially optimal levels. This paper shows how changing the number of vehicles on the streets of New York City, affects traffic congestion and the substitution patterns to other transportation modes and quantifies the associated welfare changes. I exploit an exogenous reduction in for-hire vehicle supply during the two major Islamic holidays. Supply is affected because 57.5 percent of taxi drivers and 33.1 percent of other for-hire drivers come from countries with large Muslim populations while demand is unaltered since the Muslim population only represents 3 percent of the total population in the city. The estimates indicate that during Muslim holidays the number of active taxis decreases by 1,000 (9.1 percent of the total), which decreases time per mile traveled (the inverse of speed) by 0.46 minutes. I also estimate substitution patterns towards other modes of transportation. A welfare calibration exercise suggests that an unanticipated reduction of active vehicles in the city results in daily welfare gains between $8 and $12 million.JEL Classifications
- R4 - Transportation Economics