Demand and Consumer Surplus in the On-demand Economy: the Case of Ride Sharing
How is economic value created by on-demand ride-sharing platforms? We exploit granular data on dynamic pricing and wait time on Uber and Lyft at type-route-time level, and public data on taxi and public transit in New York City. We estimate a discrete-choice demand model that allows substitution among transportation modes. Counterfactual analyses show three main findings. First, platform users gain 72 cents per dollar spent on these platforms. Second, welfare gains are disproportionately higher in locations and times that have been underserved by taxis and public transit. Third, we estimate that 64% of welfare gains come from dynamic pricing used by these platforms.