Good Days, Bad Days: Stock Market Fluctuation and Taxi Tipping Decisions

Weiqiang Tan () and Jian Zhang ()
Additional contact information
Weiqiang Tan: Department of Social Sciences, The Education University of Hong Kong, Tai Po, Hong Kong SAR, People’s Republic of China
Jian Zhang: Faculty of Business and Economics, The University of Hong Kong, Pok Fu Lam Road, Hong Kong SAR, People’s Republic of China

Management Science, 2021, vol. 67, issue 6, 3965-3984

Abstract: Using taxicab tipping records in New York City (NYC), we develop a novel measure of real-time utility and quantitatively assess the impact of wealth change on the well-being of individuals based on the core tenet of prospect theory. The baseline estimate suggests that a one-standard-deviation increase in the stock market index is associated with a 0.3% increase in the daily average tipping ratio, which translates to an elasticity estimate of 0.3. The impact is short-lived and in line with the wealth effect interpretation. Consistent with loss aversion, we find that the impact is primarily driven by wealth loss rather than gain. We exploit Global Positioning System and timestamp information and design two difference-in-differences tests to establish causal inference. Exploitation of the characteristics of individual stocks suggests that the effect of wealth change on real-time utility is more pronounced in the stocks of firms with large market capitalization. Finally, our aggregate estimate suggests that annual tip revenue in the NYC taxi industry is associated with stock market fluctuations, ranging from −$17.5 million to $12.9 million.

Keywords: consumption; stock market; loss aversion; investor mood; taxi tipping (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.2019.3557 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:67:y:2021:i:6:p:3965-3984

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().