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The social value of a ridesharing platform: a hedonic pricing approach

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  • Yongwook Paik

    (Korea Advanced Institute of Science and Technology)

  • Christos A. Makridis

    (Stanford University)

Abstract

Governments around the world have been facing the challenges of regulating the ever-increasing prevalence of ridesharing platforms, leading to a proliferation of academic and policy debates about the social value of such platforms. However, the overall social value is still unclear because when analyzing the net benefit provided by ridesharing platforms, prior studies have focused on either supply side (i.e., drivers) or demand side (i.e., passengers) users without considering nonusers. Conversely, some studies that have considered the spillover effect of a ridesharing platform on nonusers have not simultaneously considered the net benefit for users. In this study, we propose that a hedonic pricing model can be used as a reasonably straightforward approach to collectively quantify the social value of a ridesharing platform for both users and nonusers. Using this approach, we exploit plausibly exogenous variation in the staggered entry of Uber into different metropolitan areas between 2010 and 2016 and find that the entry of Uber leads to, on average, a 2.8% increase in median housing prices per square foot within a metropolitan area. We also find that there is substantial spatial heterogeneity, with benefits concentrated in areas with greater dependence on public transportation and higher levels of traffic delay. By quantitatively computing the social value of a ridesharing platform with a hedonic pricing model, our study helps government regulators generate policies that are more likely to promote public welfare and become less susceptible to political whims.

Suggested Citation

  • Yongwook Paik & Christos A. Makridis, 2023. "The social value of a ridesharing platform: a hedonic pricing approach," Empirical Economics, Springer, vol. 64(5), pages 2125-2150, May.
  • Handle: RePEc:spr:empeco:v:64:y:2023:i:5:d:10.1007_s00181-022-02310-9
    DOI: 10.1007/s00181-022-02310-9
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    More about this item

    Keywords

    Platform; Hedonic pricing; Social value; Ridesharing; Uber;
    All these keywords.

    JEL classification:

    • D60 - Microeconomics - - Welfare Economics - - - General
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise

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