Ridesharing Services Improve Traditional Taxi Service

Ridesharing Services Improve Traditional Taxi Service

Wallsten Analysis Reveals Competitive Effects of “Sharing Economy”

Contact: Amy Smorodin
(202) 828-4405

June 2, 2015 – Competition introduced by the rising popularity of ridesharing services, such as Uber, is improving the consumer experience of both ridesharing and traditional taxicabs users, explains Scott Wallsten in “The Competitive Effects of the Sharing Economy: How is Uber Changing Taxis?” released today by the Technology Policy Institute.

In his paper, Wallsten, TPI Vice President for Research and Senior Fellow, analyzes data from the New York City Taxi and Limousine Commission, the city of Chicago and Google Trends to reveal empirical evidence of the competitive effects of ridesharing services.

Wallsten finds that data from New York City and Chicago show that taxis respond to new competition by improving quality, as the highly regulated services are severely circumscribed in their ability to lower prices.

In New York, the increasing popularity of Uber is associated with decreases in per-trip taxi service complaints. While some of the decrease in complaints is likely the result of consumer’s switching from traditional taxis to ridesharing services, past research shows “complaints are correlated with quality, implying that the results are not inconsistent with an increase in taxi quality.”

Data from Chicago, which collects detailed information on the types of complaints filed, further shows evidence of cabs improving quality of service in response to competition from Uber. “In particular,” Wallsten finds, “in Chicago the data suggest that complaints about things a driver might do to affect quality-use of air conditioning, ‘broken’ credit card machines, rudeness, and talking on cell phones-all seem to have decreased along with Uber’s rise.”

While the available data do not make it possible to determine the magnitude of consumer surplus created by new competition, Wallsten’s analysis “begins to shed empirical light on the competitive effects of the sharing economy, demonstrating that benefit may accrue not just to those who avail themselves of new options, like ride-sharing, but also to those who stick with traditional providers.”

The Competitive Effects of the Sharing Economy: How is Uber Changing Taxis?” is available on the TPI website.

The Technology Policy Institute

The Technology Policy Institute is a non-profit research and educational organization that focuses on the economics of innovation, technological change, and related regulation in the United States and around the world. More information is available at https://techpolicyinstitute.org/.

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