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The Economics of Shared Mobility
The Economics of Shared Mobility

The Economics of Shared Mobility - Description

Michael Manville Cornell University The Basic Problem How to get a ride from someone else A problem of information Coordination will rider and driver be in same place Negotiation Can they agree on terms ID: 510249 Download Presentation


tncs costs controls taxi costs tncs taxi controls information driver dispatch taxis market service upfront medallion demand prices tnc

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The Economics of Shared Mobility

Michael Manville

Cornell UniversitySlide2

The Basic Problem

How to get a ride from someone else?


problem of


Coordination: will rider and driver be in same place?

Negotiation: Can they agree on terms?

Trust: Do rider and driver


to share a vehicle?Slide3

A Spectrum of Shared Mobility


: high

information costs across the board

Dispatch taxi:

costs fall for riders, but requires large upfront costs for driversStreet Hail Taxis: Reduces upfront costs, pushes some information costs back on riders Slide4

Some Common Taxi Regulations


controls – Limited number of vehicles allowed

Price controls – fares set by authorities

Location controls – Cabs can’t pick up fares in neighboring cities

Combined with a dispatch market that naturally tends toward monopoly, can lead to poor service and particularly shortages Slide5

Why TNCs Thrive

Peer-to-Peer app

can reduce information costs


upfront entry costs

Driver provides the vehicleApp removes need for dispatch serviceProvides map showing vehicle progressShows driver picture and ratingsCashless transaction, digital footprints for trip Information gleaned from all app users goes into setting real-time prices that can minimize shortagesSlide6

Why Surge Pricing Works

No price controls

No quantity or location controls

Flexible employment means large pool of potential drivers on reserve

Lets rising prices

increase supply, not just reduce demandSlide7

What Happens to the Taxi Industry?

Depends on regulatory response, and extent to which market has unmet demand for trips


TNCs remain less regulated than taxis, and the demand for rides is fixed, TNCs could cannibalize taxi business

In medallion markets: lost capital, lower leasesLost earnings for cab drivers, possibly made up by switching to TNC workFull-time driving becomes a less viable occupationSlide8

Other Scenarios

TNCs are regulated like dispatch taxis

Puts cabs on an even footing, but might undermine the flexibility that consumers



ides-for-hire market growsTNCs could thrive without cannibalizing taxi driver revenue (but might harm medallion value)Dispatch taxi regulation is reducedMore cabs, fewer location controls, flexible pricesTaxis can compete on service, but especially in medallion markets owners might feel this is unfairSlide9

Could TNCs Become Monopolists?

Uber and Lyft have market power

Less likely they will be able to restrain competition

Low entry barriers, again

People can drive for both firmsSlide10

A Final Wild Card: The Mental Math of TNC Driving

How heavily does depreciation weigh in the calculations of TNC drivers?

If people underestimate depreciation costs, they may overestimate their real wage

As vehicles begin to wear out, will we see adjustments in people’s willingness

to drive?

Shom More....
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