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Personalized Pricing and the Value of Time: Evidence from Auctioned Cab Rides

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  • Nicholas Buchholz
  • Laura Doval
  • Jakub Kastl
  • Filip Matějka
  • Tobias Salz

Abstract

We recover valuations of time using detailed data from a large ride-hail platform, where drivers bid on trips and consumers choose between a set of rides with different prices and wait times. Leveraging a consumer panel, we estimate demand as a function of both prices and wait times and use the resulting estimates to recover heterogeneity in the value of time across consumers. We study the welfare implications of personalized pricing and its effect on the platform, drivers, and consumers. Taking into account drivers’ optimal reaction to the platform’s pricing policy, personalized pricing lowers consumer surplus by 2.5% and increases overall surplus by 5.2%. Like the platform, drivers benefit from personalized pricing. ETA-based pricing– where different prices are set for various wait times and where extensive use of consumer data is not required–can capture a significant portion of the profits garnered from personalized pricing, while simultaneously benefiting consumers.

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  • Nicholas Buchholz & Laura Doval & Jakub Kastl & Filip Matějka & Tobias Salz, 2020. "Personalized Pricing and the Value of Time: Evidence from Auctioned Cab Rides," NBER Working Papers 27087, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:27087
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    Cited by:

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    2. Bruno Jullien & Alessandro Pavan & Marc Rysman, 2021. "Two-sided markets, pricing, and network effects," Post-Print hal-03828345, HAL.
    3. Tarduno, Matthew, 2021. "The congestion costs of Uber and Lyft," Journal of Urban Economics, Elsevier, vol. 122(C).
    4. Stephen J. Redding, 2024. "Quantitative Urban Economics," Working Papers 340, Princeton University, Department of Economics, Center for Economic Policy Studies..
    5. Krekel, Christian & MacKerron, George, 2023. "Back to Edgeworth? Estimating the Value of Time Using Hedonic Experiences," IZA Discussion Papers 16308, Institute of Labor Economics (IZA).
    6. Fan Wu & Yi Xin, 2024. "Estimating Nonseparable Selection Models: A Functional Contraction Approach," Papers 2411.01799, arXiv.org.
    7. Bencsik, Panka & Lusher, Lester & Taylor, Rebecca L.C., 2023. "Slow Traffic, Fast Food: The Effects of Time Lost on Food Store Choice," IZA Discussion Papers 16036, Institute of Labor Economics (IZA).
    8. Zhang, Yuhan & Shao, Yichang & Bi, Hui & Aoyong, Li & Ye, Zhirui, 2023. "Bike-sharing systems rebalancing considering redistribution proportions: A user-based repositioning approach," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 610(C).
    9. Ariel Goldszmidt & John A. List & Robert D. Metcalfe & Ian Muir & V. Kerry Smith & Jenny Wang, 2020. "The Value of Time in the United States: Estimates from Nationwide Natural Field Experiments," NBER Working Papers 28208, National Bureau of Economic Research, Inc.
    10. Lam, Chungsang Tom & Liu, Meng & Hui, Xiang, 2021. "The geography of ridesharing: A case study on New York City," Information Economics and Policy, Elsevier, vol. 57(C).
    11. Christensen, Peter & Osman, Adam, 2021. "The Demand for Mobility: Evidence from an Experiment with Uber Riders," IZA Discussion Papers 14179, Institute of Labor Economics (IZA).
    12. Durrmeyer, Isis & Martinez, Nicolas, 2022. "The Welfare Consequences of Urban Traffic Regulations," TSE Working Papers 22-1378, Toulouse School of Economics (TSE), revised Dec 2024.
    13. Su, Yichen, 2022. "Measuring the Value of Urban Consumption Amenities: A Time-Use Approach," Journal of Urban Economics, Elsevier, vol. 132(C).
    14. Gilles Duranton & Jessie Handbury, 2023. "COVID and Cities, Thus Far," Economic Policy Review, Federal Reserve Bank of New York, vol. 29(2), pages 6-52, October.
    15. Enache, Andreea & Friberg, Richard & Wiklander, Magnus, 2023. "Demand for in-app purchases in mobile apps—A difference-in-difference approach," International Journal of Industrial Organization, Elsevier, vol. 88(C).
    16. Su, Yichen, 2022. "Measuring the Value of Urban Consumption Amenities: A Time-Use Approach," MPRA Paper 113158, University Library of Munich, Germany.
    17. Wichman, Casey J. & Cunningham, Brandon, 2023. "Notching for free: Do cyclists reveal the opportunity cost of time?," Journal of Environmental Economics and Management, Elsevier, vol. 119(C).
    18. Gabriel Kreindler, 2024. "Peak‐Hour Road Congestion Pricing: Experimental Evidence and Equilibrium Implications," Econometrica, Econometric Society, vol. 92(4), pages 1233-1268, July.
    19. Jackson Dorsey & Ashley Langer & Shaun McRae, 2022. "Fueling Alternatives: Gas Station Choice and the Implications for Electric Charging," NBER Working Papers 29831, National Bureau of Economic Research, Inc.
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