Fickle Fingers: Ride-Hail Surge Factors and Taxi Bookings

49 Pages Posted: 25 Apr 2018 Last revised: 24 Jun 2020

See all articles by Sumit Agarwal

Sumit Agarwal

National University of Singapore

Ben Charoenwong

National University of Singapore - Department of Finance

Shih-Fen Cheng

Singapore Management University - School of Information Systems

Jussi Keppo

National University of Singapore - NUS Business School

Date Written: March 26, 2019

Abstract

We study the role of ride-hailing surge factors on the allocative efficiency of taxis by combining a reduced form estimation with structural analyses using machine-learning-based demand predictions. We estimate an upper-bound of the cross-price elasticity of taxi bookings to surge factors of only 0.26, but incorporating surge factors into a demand-prediction model improves the out-of-sample accuracy by 12-15%. Our structural analyses based on a driver guidance system finds the improved accuracy reduces drivers' vacant roaming times by 9.4% and increases average trips per taxi by 2.3%, suggesting the price information is valuable across platforms, even if elasticities are low.

Keywords: transportation economics, surge pricing, consumer behavior, big data analytics

JEL Classification: C53, D12, D47, R41

Suggested Citation

Agarwal, Sumit and Charoenwong, Ben and Cheng, Shih-Fen and Keppo, Jussi, Fickle Fingers: Ride-Hail Surge Factors and Taxi Bookings (March 26, 2019). Available at SSRN: https://ssrn.com/abstract=3157378 or http://dx.doi.org/10.2139/ssrn.3157378

Sumit Agarwal

National University of Singapore ( email )

15 Kent Ridge Drive
Singapore, 117592
Singapore
8118 9025 (Phone)

HOME PAGE: http://www.ushakrisna.com

Ben Charoenwong (Contact Author)

National University of Singapore - Department of Finance ( email )

Mochtar Riady Building
15 Kent Ridge Drive
Singapore, 119245
Singapore

HOME PAGE: http://bizfaculty.nus.edu/faculty-profiles/519-ben

Shih-Fen Cheng

Singapore Management University - School of Information Systems ( email )

80 Stamford Road
Singapore, 178902
Singapore

HOME PAGE: http://www.mysmu.edu/faculty/sfcheng/

Jussi Keppo

National University of Singapore - NUS Business School ( email )

1 Business Link
Singapore, 117592
Singapore

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