Notching for Free: Do Cyclists Reveal the Value of Time?

Casey Wichman and Brandon Cunningham

No 17-17, RFF Working Paper Series from Resources for the Future

Abstract: We explore a nonlinear, "notched" pricing structure in a novel market—urban bike-sharing—to identify how inframarginal price changes affect consumer behavior. By observing cyclists extending their trips to avoid a discontinuous price increase, we are able to estimate a time-for-money trade-off directly for both commuting and recreational trips. Although our estimation strategy reveals an estimate of consumers' opportunity cost of time under neoclassical assumptions, we find that a 400% price increase does not affect behavior in a meaningful way. This result suggests consumers respond more strongly to quantity signals, which has direct implications for nonlinear pricing in other settings.

Date: 2017-09-07
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