Do Digital Platforms Reduce Moral Hazard? The Case of Uber and Taxis

44 Pages Posted: 9 Sep 2018

See all articles by Meng Liu

Meng Liu

Massachusetts Institute of Technology (MIT) - Sloan School of Management; Washington University in St. Louis

Erik Brynjolfsson

Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

Jason Dowlatabadi

Uber Technologies Inc.

Multiple version iconThere are 2 versions of this paper

Date Written: August 27, 2018

Abstract

Digital platforms like Uber can enhance market transparency and mitigate moral hazard via ratings of buyers and sellers, real-time monitoring, and low-cost complaint channels. We compare driver choices at Uber with taxis by matching trips so they are subject to the same optimal route. We also study drivers who switch from taxis to Uber. We find (1) drivers in taxis detour about 7% on airport routes, with non-local passengers experiencing longer detours; (2) these detours lead to longer travel times; and (3) drivers on the Uber platform are more likely to detour on airport routes with high surge pricing.

Suggested Citation

Liu, Meng and Brynjolfsson, Erik and Dowlatabadi, Jason, Do Digital Platforms Reduce Moral Hazard? The Case of Uber and Taxis (August 27, 2018). Available at SSRN: https://ssrn.com/abstract=3239763 or http://dx.doi.org/10.2139/ssrn.3239763

Meng Liu (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

Cambridge, MA 02139
United States

Washington University in St. Louis ( email )

One Brookings Drive
Campus Box 1208
Saint Louis, MO MO 63130-4899
United States

Erik Brynjolfsson

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

E53-313
Cambridge, MA 02142
United States
617-253-4319 (Phone)

HOME PAGE: http://digital.mit.edu/erik

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Jason Dowlatabadi

Uber Technologies Inc. ( email )

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

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