The Social Value of a Ridesharing Platform: A Hedonic Pricing Approach

31 Pages Posted: 2 Jan 2019 Last revised: 16 Jun 2021

See all articles by Christos Makridis

Christos Makridis

Stanford University; Arizona State University (ASU); Massachusetts Institute of Technology (MIT) - Sloan School of Management; Department of Veterans Affairs (VA)

Yongwook Paik

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

Date Written: June 15, 2021

Abstract

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

Makridis, Christos and Paik, Yongwook, The Social Value of a Ridesharing Platform: A Hedonic Pricing Approach (June 15, 2021). TPRC48: The 48th Research Conference on Communication, Information and Internet Policy, Available at SSRN: https://ssrn.com/abstract=3299228 or http://dx.doi.org/10.2139/ssrn.3299228

Christos Makridis (Contact Author)

Stanford University ( email )

Stanford, CA 94305
United States

Arizona State University (ASU) ( email )

Farmer Building 440G PO Box 872011
Tempe, AZ 85287
United States

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

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

Department of Veterans Affairs (VA) ( email )

810 Vermont Avenue NW
Washington, DC 20420
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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