Surge Pricing on a Service Platform Under Spatial Spillovers: Evidence From Uber

36 Pages Posted: 4 Nov 2018

See all articles by Kyungmin (Brad) Lee

Kyungmin (Brad) Lee

Boston University - Questrom School of Business

Marcus Bellamy

Boston University - Questrom School of Business

Nitin Joglekar

Boston University - Questrom School of Business

Shan Jiang

Northeastern University - College of Computer and Information Science

Christo Wilson

Northeastern University - College of Computer and Information Science

Date Written: October 6, 2018

Abstract

Ride-sharing platforms employ surge pricing to match anticipated capacity spillover with demand. We develop an optimization model to characterize the relationship between surge price and spillover. We test predicted relationships using a spatial panel model on a dataset from Uber’s operation. Results reveal that Uber’s pricing accounts for both capacity and price spillover. There is a debate in the management community on the efficacy of labor welfare mechanisms associated with shared capacity. We conduct counterfactual analysis to provide guidance in regards to the debate, for managing congestion, while accounting for consumer and labor welfare through this online platform.

Keywords: Digitalization; Operations, Platforms; Sharing Economy; Spillover Effects; Supply Chain Configuration; Revenue Management

Suggested Citation

Lee, Kyungmin and Bellamy, Marcus and Joglekar, Nitin and Jiang, Shan and Wilson, Christo, Surge Pricing on a Service Platform Under Spatial Spillovers: Evidence From Uber (October 6, 2018). Available at SSRN: https://ssrn.com/abstract=3261811 or http://dx.doi.org/10.2139/ssrn.3261811

Kyungmin Lee

Boston University - Questrom School of Business ( email )

595 Commonwealth Avenue
Boston, MA 02215
United States

Marcus Bellamy

Boston University - Questrom School of Business ( email )

595 Commonwealth Avenue
Boston, MA MA 02215
United States

Nitin Joglekar (Contact Author)

Boston University - Questrom School of Business ( email )

595 Commonwealth Ave
Boston, MA 02466
United States

Shan Jiang

Northeastern University - College of Computer and Information Science ( email )

360 Huntington Avenue
Boston, MA 02115
United States

Christo Wilson

Northeastern University - College of Computer and Information Science ( email )

360 Huntington Avenue
Boston, MA 02115
United States

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