The Social Value of a Ridesharing Platform

34 Pages Posted: 2 Jan 2019 Last revised: 30 Jan 2020

See all articles by Christos Makridis

Christos Makridis

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

Yongwook Paik

KAIST College of Business, Korea Advanced Institute of Science and Technology (KAIST)

Date Written: December 11, 2018

Abstract

Ridesharing has become ubiquitous throughout the United States, leading to a proliferation of academic studies and policy debates about its welfare implications. However, the overall social value of a ridesharing platform is still unclear because prior literature focuses only on the supply side (i.e., drivers) or the demand side (i.e., passengers) of ridesharing when analyzing its welfare and does not consider non-users of the platform. In this study, we aim to quantify the social value of a ridesharing platform using a hedonic pricing model, exploiting plausibly exogenous variation in the staggered entry of UberX into different metropolitan areas between 2010 and 2016. We find that the entry of UberX into a metropolitan area leads to a 2.9% rise in median housing prices per square foot. A back-of-the-envelope calculation suggests that the entry of UberX is associated with a welfare gain of approximately $795 million. We also find substantial spatial heterogeneity, with benefits concentrated in areas with higher shares of college graduates, greater dependence on public transportation, and a lower value of vehicles per capita. By objectively computing the value of a ridesharing platform, our study can help regulators and firm managers generate effective policies. Moreover, this study contributes to the digital platform literature by introducing a relatively straightforward method—the hedonic pricing method—to quantitatively estimate the value of an innovative business platform that relies on online-to-offline services at the local level.

Keywords: sharing economy, welfare, hedonic pricing model, ridesharing, digital platform

JEL Classification: D60, I31, M13, R23, R41

Suggested Citation

Makridis, Christos and Paik, Yongwook, The Social Value of a Ridesharing Platform (December 11, 2018). Available at SSRN: https://ssrn.com/abstract=3299228 or http://dx.doi.org/10.2139/ssrn.3299228

Christos Makridis (Contact Author)

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

100 Main Street
E62-416
Cambridge, MA 02142
United States

Yongwook Paik

KAIST College of Business, Korea Advanced Institute of Science and Technology (KAIST) ( email )

85 Hoegiro, Supex Building Room 482
Seoul, 02455
Korea, Republic of (South Korea)

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