Does Surge Pricing Affect Customer Complaint Rates?

39 Pages Posted: 17 Aug 2019 Last revised: 4 Sep 2019

See all articles by Yanhao 'Max' Wei

Yanhao 'Max' Wei

University of Southern California - Marshall School of Business

Linli Xu

University of Minnesota - Twin Cities - Carlson School of Management

Yi Zhu

University of Minnesota - Carlson School of Management

Date Written: August 14, 2019

Abstract

Many two-sided matching platforms, such as those for lodging, labor, and ridesharing, use a review system to monitor service providers, where dissatisfied customers can complain about their service experience. Using comprehensive datasets from a large ridesharing platform, this paper explores whether service providers (drivers) systematically receive complaints for reasons that are not their fault. We find that surge pricing, a factor that is not the driver's fault, increases the likelihood of complaints by a factor of 1.12 to 1.33, on average. This effect is amplified for novice drivers and during rush hours. We use two additional approaches to provide causal support for the finding: a regression discontinuity exploiting a policy change that sets caps on surge pricing, and a matching estimator exploiting discontinuity in surge triggering. To extend the endpoint of our analysis to the economic impact, we estimate how the complaints affect a driver's daily income. We calculate that 25% of a driver's immediate income gain from surge fares is offset by the future income loss due to the increased complaint rate. These results suggest platforms should account for non-service-provider-responsible factors when monitoring and evaluating customer reviews to improve service experiences.

Keywords: Customer Complaints, Non-Service-Provider-Responsible Factors, Review System, Ridesharing, Surge Pricing, Two-Sided Matching Platforms, Big Data

Suggested Citation

Wei, Yanhao and Xu, Linli and Zhu, Yi, Does Surge Pricing Affect Customer Complaint Rates? (August 14, 2019). Available at SSRN: https://ssrn.com/abstract=3437470 or http://dx.doi.org/10.2139/ssrn.3437470

Yanhao Wei

University of Southern California - Marshall School of Business ( email )

701 Exposition Blvd
Los Angeles, CA 90089
United States

Linli Xu (Contact Author)

University of Minnesota - Twin Cities - Carlson School of Management ( email )

321 - 19th Avenue South
Minneapolis, MN 55455
United States

Yi Zhu

University of Minnesota - Carlson School of Management ( email )

321 - 19th Ave. South, Suite 3-150
Minneapolis, MN 55455
United States

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