Do Digital Platforms Reduce Moral Hazard? The Case of Uber and Taxis / Meng Liu, Erik Brynjolfsson, Jason Dowlatabadi.

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Liu, Meng

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w25015.Publication details: Cambridge, Mass. National Bureau of Economic Research 2018.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: Digital platforms like Uber can enhance market transparency and mitigate moral hazard via ratings of buyers and sellers, real-time monitoring, and low-cost complaint channels. We compare driver choices at Uber with taxis by matching trips so they are subject to the same optimal route. We also study drivers who switch from taxis to Uber. We find: (1) drivers in taxis detour about 7% on airport routes, with non-local passengers experiencing longer detours; (2) these detours lead to longer travel times; and (3) drivers on the Uber platform are more likely to detour on airport routes with high surge pricing.

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September 2018.

Digital platforms like Uber can enhance market transparency and mitigate moral hazard via ratings of buyers and sellers, real-time monitoring, and low-cost complaint channels. We compare driver choices at Uber with taxis by matching trips so they are subject to the same optimal route. We also study drivers who switch from taxis to Uber. We find: (1) drivers in taxis detour about 7% on airport routes, with non-local passengers experiencing longer detours; (2) these detours lead to longer travel times; and (3) drivers on the Uber platform are more likely to detour on airport routes with high surge pricing.