Working Paper: NBER ID: w25015
Authors: Meng Liu; Erik Brynjolfsson; Jason Dowlatabadi
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.
Keywords: digital platforms; moral hazard; Uber; taxis; driver behavior
JEL Codes: D47; D81; L15; L91; M52
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| detouring behavior (D91) | driver moral hazard (R48) |
| financial incentives significantly influence routing decisions (L90) | Uber drivers detour during high surge pricing (L90) |
| taxi drivers detour on average by 7.4% more on airport trips compared to Uber drivers (R41) | detouring behavior (D91) |
| Uber drivers are more likely to detour during periods of high surge pricing (L90) | routing decisions (R48) |
| taxi drivers generally experience longer trip durations due to their detours (R41) | trip efficiency (R41) |
| Uber drivers tend to have more efficient routing (R41) | trip efficiency (R41) |
| the technology and incentive structures of Uber help mitigate moral hazard compared to traditional taxis (L92) | driver moral hazard (R48) |
| real-time monitoring and ratings enhance market transparency (G18) | driver moral hazard (R48) |