The competitive effects of the sharing economy: how is uber changing taxis?
Answers
Seemingly overnight, the so-called ‘sharing economy’ has turned traditionally underused assets into competitors to established industries,” Wallsten wrote. “Some believe this business model will threaten incumbents across the economy. How widespread the sharing economy will be remains to be seen, but to date it has had unquestionably large effects on the hotel industry through Airbnb and the taxi industry through ride-sharing services like Uber, Lyft, and Sidecar. The development of new services that did not previously exist almost by definition make consumers better off. The benefits to consumers, however, are likely to extend beyond those who use these new services if incumbents are forced to respond to new competition by improving service and or reducing price.”
Wallsten writes that competition for consumers’ money improves taxicab service.
“The results from New York City and Chicago are consistent with the idea that taxis respond to new competition by improving quality,” Wallsten wrote. “If drivers are willing to reduce prices to compete, it seems possible that they would also make changes that are relatively costless. While the lack of repeat business in the same taxi might reduce the benefits to a driver of better behavior, he might still benefit from higher tips and lower likelihood of complaints.”
ARTICLE TAGS
ECONOMY TRANSPORTATION TAXES GOVERNMENT SPENDING