Minimum Earnings Regulation and the Stability of Marketplaces

18 Pages Posted: 17 Dec 2019 Last revised: 15 Jan 2020

See all articles by Arash Asadpour

Arash Asadpour

Lyft, Inc.

Ilan Lobel

New York University (NYU)

Garrett van Ryzin

Cornell Tech; Lyft, Inc.

Date Written: December 13, 2019

Abstract

We build a model to study the implications of utilization-based minimum earning regulations of the kind recently enacted by New York City for its ride-hailing providers. We identify the precise conditions under which a utilization-based minimum earnings rule causes marketplace instability, where stability is defined as the ability of platforms to keep wages bounded while maintaining the current flexible (free-entry) work model. We also calibrate our model using publicly available data, showing the limited power of the law to increase earnings within an open marketplace. We argue that affected ride-hailing companies might respond to the law by reducing driver flexibility.

Keywords: ride-hailing, ridesharing, market design

Suggested Citation

Asadpour, Arash and Lobel, Ilan and van Ryzin, Garrett, Minimum Earnings Regulation and the Stability of Marketplaces (December 13, 2019). Available at SSRN: https://ssrn.com/abstract=3502607 or http://dx.doi.org/10.2139/ssrn.3502607

Arash Asadpour

Lyft, Inc. ( email )

San Francisco, CA

Ilan Lobel (Contact Author)

New York University (NYU) ( email )

Bobst Library, E-resource Acquisitions
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New York, NY 10003-711
United States

Garrett Van Ryzin

Cornell Tech ( email )

2 W Loop Rd
New York, NY 10044
United States

Lyft, Inc. ( email )

San Francisco, CA

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