The Social Value of a Ridesharing Platform: A Hedonic Pricing Approach
31 Pages Posted: 2 Jan 2019 Last revised: 16 Jun 2021
Date Written: June 15, 2021
Governments around the world have been facing the challenges of regulating the ever-growing prevalence of ridesharing platforms, leading to a proliferation of academic studies and policy debates about the net benefit of ridesharing. However, the overall social value of a ridesharing platform is still unclear because when analyzing its welfare, prior literature focuses on either the supply-side (i.e., drivers) or the demand-side (i.e., passengers) users of the platform without considering other citizens who are nonusers. Conversely, some studies that do consider the spillover effect of a ridesharing platform on nonusers do not simultaneously consider the net benefit on the users of the platform. In this study, we propose that a hedonic pricing model is a reasonably straightforward approach to collectively quantifying the social value of a ridesharing platform to both users and nonusers. Using the approach, we exploit plausibly exogenous variation in the staggered entry of Uber into different metropolitan areas between 2010 and 2016 and find that the entry of Uber leads to, on average, a 2.7% rise in median housing prices per square foot. However, we also find that there is 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 social value of a ridesharing platform with a hedonic pricing model, our study helps government regulators generate policies that are more likely to promote public welfare and become less susceptible to political whims.
Keywords: social value, platform, sharing economy, hedonic pricing, ridesharing, Uber
JEL Classification: D60, I31, M13, R23, R41
Suggested Citation: Suggested Citation