The Value of Time: An Empirical Study on a Ride-Sharing Platform

44 Pages Posted: 30 Oct 2020

See all articles by Maiju Guo

Maiju Guo

Zhongnan University of Economics and Law - School of Business Administration

Xing Li

Peking University - Guanghua School of Management

Ying Lei

New York University Shanghai

Qun (Tracy) Li

affiliation not provided to SSRN

Date Written: March 1, 2020

Abstract

Consumption is usually associated with time spending. Sometimes the length of time itself is part of the products, for example, the length of consulting services or time duration of transportation. In other scenarios, there is a minimum requirement of time, or waiting time, that customers have to spend during their consumption process; examples include the long queue outside an amusement park ride, shipping time after placing an order on Amazon, and waiting time when hailing for a ride on the road. Marketers have started to offer various types of time-related service packages correspondingly, such as premium pass, 1-day delivery, and priority order. In this paper, we use anonymized and normalized browsing and order data from Didi – an online ride-hailing company, and estimate the value of waiting time in riding scenarios. We find that the value of saving one standardized unit of waiting time is equivalent to lowering 0.97 standardized unit of price for an average passenger. As a reference, upgrading to a higher level of car type is equivalent to lowering prices by only 0.4 standardized units. The marginal value is decreasing when the time horizon is short, but there exists a turning point at about 1.5 standardized time units. When the waiting time is less than 1.5 units, the marginal utility is decreasing; whereas when it is longer than 1.5 units, passengers exhibit an increasing marginal value in waiting time. Furthermore, we find a larger turning point in rush-hour orders (relative to non-rush-hour orders), and in weekday orders (relative to weekend orders). Our study provides new insights on understanding the value of time and is also practically relevant for managerial decisions on time-related product design and pricing.

Keywords: time value, time sensitivity, sharing economy, pricing strategy

JEL Classification: L10, M31, R41

Suggested Citation

Guo, Maiju and Li, Xing and Lei, Ying and Li, Qun (Tracy), The Value of Time: An Empirical Study on a Ride-Sharing Platform (March 1, 2020). Available at SSRN: https://ssrn.com/abstract=3702075 or http://dx.doi.org/10.2139/ssrn.3702075

Maiju Guo

Zhongnan University of Economics and Law - School of Business Administration ( email )

Wuhan, Hubei 430073
China

Xing Li

Peking University - Guanghua School of Management ( email )

Peking University
Beijing, Beijing 100871
China

Ying Lei (Contact Author)

New York University Shanghai ( email )

Qun (Tracy) Li

affiliation not provided to SSRN

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