Using Big Data to Estimate Consumer Surplus: The Case of Uber

43 Pages Posted: 12 Sep 2016

See all articles by Peter Cohen

Peter Cohen

Uber Technologies Inc.

Robert W. Hahn

University of Oxford, Smith School; Georgetown University

Jonathan Hall

Uber Technologies Inc.

Steven D. Levitt

University of Chicago; National Bureau of Economic Research (NBER); American Bar Foundation

Robert Metcalfe

University of Chicago - Becker Friedman Institute for Economics

Date Written: September 2016

Abstract

Estimating consumer surplus is challenging because it requires identification of the entire demand curve. We rely on Uber’s “surge” pricing algorithm and the richness of its individual level data to first estimate demand elasticities at several points along the demand curve. We then use these elasticity estimates to estimate consumer surplus. Using almost 50 million individual-level observations and a regression discontinuity design, we estimate that in 2015 the UberX service generated about $2.9 billion in consumer surplus in the four U.S. cities included in our analysis. For each dollar spent by consumers, about $1.60 of consumer surplus is generated. Back-of-the-envelope calculations suggest that the overall consumer surplus generated by the UberX service in the United States in 2015 was $6.8 billion.

Suggested Citation

Cohen, Peter and Hahn, Robert W. and Hall, Jonathan and Levitt, Steven D. and Metcalfe, Robert, Using Big Data to Estimate Consumer Surplus: The Case of Uber (September 2016). NBER Working Paper No. w22627. Available at SSRN: https://ssrn.com/abstract=2837639

Peter Cohen (Contact Author)

Uber Technologies Inc. ( email )

1455 Market St
San Francisco, CA 94103-1331
United States

Robert W. Hahn

University of Oxford, Smith School ( email )

Oxford
United Kingdom

Georgetown University

Georgetown Center for Business and Public Policy
Washington, DC 20057
United States

Jonathan Hall

Uber Technologies Inc. ( email )

1455 Market St
San Francisco, CA 94103-1331
United States

Steven D. Levitt

University of Chicago ( email )

1126 East 59th Street
Chicago, IL 60637
United States
773-834-1862 (Phone)
773-702-8490 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

American Bar Foundation

750 N. Lake Shore Drive
Chicago, IL 60611
United States

Robert Metcalfe

University of Chicago - Becker Friedman Institute for Economics ( email )

Chicago, IL 60637
United States

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