Notching for free: Do cyclists reveal the opportunity cost of time?

Casey Wichman and Brandon Cunningham

Journal of Environmental Economics and Management, 2023, vol. 119, issue C

Abstract: We estimate time-for-money tradeoffs for cyclists by exploiting revealed behavior in response to a bikesharing program’s discontinuous, “notched” pricing structure. The cost of a bicycle trip increases from $0 to $1 after 30 min. We observe cyclists adding time to their trip by checking-in at an intermediate station along their route to avoid the price, thus revealing their value of saving time (VST) cycling. Estimates of the VST for cycling are close to the minimum wage or roughly 20% of hourly wages implied by median incomes. These estimates are smaller than comparable estimates for automobiles, likely driven by leisure benefits of cycling. Although bicycle commuters exhibit somewhat larger VSTs, our results across user type, time, and route-specific characteristics are relatively homogeneous, suggesting a more fundamental time–money tradeoff. Additionally, we estimate small changes along extensive margins in response to a large price increase, but changes along intensive margins are virtually nonexistent.

Keywords: Notches; Opportunity cost of time; Bicycle-sharing; Nonlinear pricing (search for similar items in EconPapers)
JEL-codes: D12 L91 Q51 R41 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeeman:v:119:y:2023:i:c:s0095069623000359

DOI: 10.1016/j.jeem.2023.102817

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