Disruptive Competition and the Cost of Leveling the Playing Field: Evidence from the Taxi Industry

67 Pages Posted: 12 Apr 2021 Last revised: 28 May 2021

See all articles by Mario Leccese

Mario Leccese

University of Maryland, College Park

Date Written: April 12, 2021

Abstract

I study the effects of a tax on ride-sharing trips in Chicago, which was nominally motivated by a desire to reduce congestion, but which also affected competition between ride-sharing platforms and traditional taxis. I find that platforms passed through more than 100% of the tax to consumers taking single rides, but there was incomplete pass-through to shared rides. This pattern can be explained by the two-sidedness of the market. The tax shifted demand back to taxis, but only in the downtown area, where competition is more intense. Finally, I find that the tax did not significantly reduce congestion and a simple calibration suggests that it lowered consumer surplus by over $300,000 per day.

Keywords: Disruptive Competition, Regulation, Tax Incidence, Two-sided Platforms, Ride-sharing

JEL Classification: H22, K23, L92, L98, R48

Suggested Citation

Leccese, Mario, Disruptive Competition and the Cost of Leveling the Playing Field: Evidence from the Taxi Industry (April 12, 2021). Available at SSRN: https://ssrn.com/abstract=3824453 or http://dx.doi.org/10.2139/ssrn.3824453

Mario Leccese (Contact Author)

University of Maryland, College Park ( email )

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