Disruptive Change in the Taxi Business: The Case of Uber

Judd Cramer and Alan Krueger

No 22083, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In most cities, the taxi industry is highly regulated and utilizes technology developed in the 1940s. Ride sharing services such as Uber and Lyft, which use modern internet-based mobile technology to connect passengers and drivers, have begun to compete with traditional taxis. This paper examines the efficiency of ride sharing services vis-à-vis taxis by comparing the capacity utilization rate of UberX drivers with that of traditional taxi drivers in five cities. The capacity utilization rate is measured by the fraction of time a driver has a fare-paying passenger in the car while he or she is working, and by the share of total miles that drivers log in which a passenger is in their car. The main conclusion is that, in most cities with data available, UberX drivers spend a significantly higher fraction of their time, and drive a substantially higher share of miles, with a passenger in their car than do taxi drivers. Four factors likely contribute to the higher capacity utilization rate of UberX drivers: 1) Uber’s more efficient driver-passenger matching technology; 2)the larger scale of Uber than taxi companies; 3) inefficient taxi regulations; and 4) Uber’s flexible labor supply model and surge pricing more closely match supply with demand throughout the day.

JEL-codes: D24 J01 J42 J44 O3 (search for similar items in EconPapers)
Date: 2016-03
New Economics Papers: this item is included in nep-pay and nep-tre
Note: LS PR
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Citations: View citations in EconPapers (216)

Published as Judd Cramer & Alan B. Krueger, 2016. "Disruptive Change in the Taxi Business: The Case of Uber," American Economic Review, vol 106(5), pages 177-182.

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Journal Article: Disruptive Change in the Taxi Business: The Case of Uber (2016)
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