Personalized Pricing and the Value of Time: Evidence from Auctioned Cab Rides

63 Pages Posted: 5 May 2020 Last revised: 7 Jul 2023

See all articles by Nicholas Buchholz

Nicholas Buchholz

Princeton University

Laura Doval

Columbia University - Columbia Business School, Economics

Jakub Kastl

Princeton University - Department of Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Filip Matějka

Charles University in Prague - CERGE-EI, a joint workplace of Charles University and the Economics Institute of the Czech Academy of Sciences

Tobias Salz

MIT

Date Written: May 2020

Abstract

We recover valuations of time using detailed data from a large ride-hail platform, where drivers bid on trips and consumers choose between a set of rides with different prices and wait times. Leveraging a consumer panel, we estimate demand as a function of both prices and wait times and use the resulting estimates to recover heterogeneity in the value of time across consumers. We study the welfare implications of personalized pricing and its effect on the platform, drivers, and consumers. Taking into account drivers’ optimal reaction to the platform’s pricing policy, personalized pricing lowers consumer surplus by 2.5% and increases overall surplus by 5.2%. Like the platform, drivers benefit from personalized pricing. ETA-based pricing– where different prices are set for various wait times and where extensive use of consumer data is not required–can capture a significant portion of the profits garnered from personalized pricing, while simultaneously benefiting consumers.

Suggested Citation

Buchholz, Nicholas and Doval, Laura and Kastl, Jakub and Matějka, Filip and Salz, Tobias, Personalized Pricing and the Value of Time: Evidence from Auctioned Cab Rides (May 2020). NBER Working Paper No. w27087, Available at SSRN: https://ssrn.com/abstract=3592164

Nicholas Buchholz (Contact Author)

Princeton University ( email )

22 Chambers Street
Princeton, NJ 08544-0708
United States

Laura Doval

Columbia University - Columbia Business School, Economics ( email )

420 West 118th Street
New York, NY 10027
United States

HOME PAGE: http://www.laura-doval.com

Jakub Kastl

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Filip Matějka

Charles University in Prague - CERGE-EI, a joint workplace of Charles University and the Economics Institute of the Czech Academy of Sciences ( email )

Politickych veznu 7
Prague, 111 21
Czech Republic

HOME PAGE: http://www.cerge-ei.cz

Tobias Salz

MIT ( email )

50 Memorial Dr
Cambridge, MA 02142
United States

HOME PAGE: http://https://economics.mit.edu/faculty/tsalz

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