Demand and Consumer Surplus in the On-Demand Economy: The Case of Ride Sharing
50 Pages Posted: 7 Jul 2017 Last revised: 12 Oct 2017
Date Written: October 11, 2017
How is economic value created by on-demand ride-sharing platforms? We exploit granular data on dynamic pricing and wait time on Uber and Lyft at type-route-time level, and public data on taxi and public transit in New York City. We estimate a discrete-choice demand model that allows substitution among transportation modes. Counterfactual analyses show three main findings. First, platform users gain 72 cents per dollar spent on these platforms. Second, welfare gains are disproportionately higher in locations and times that have been underserved by taxis and public transit. Third, we estimate that 64% of welfare gains come from dynamic pricing used by these platforms.
Keywords: Sharing Economy, On-demand Economy, Demand Estimation, Dynamic Pricing, Consumer Surplus
JEL Classification: L10, L91, D40, D60, O33
Suggested Citation: Suggested Citation