Journal of Student Research 2018

The Impact Of Uber’s Presence On Taxi Fare The Impact Of Uber’s Presence On Taxi Fare

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Roselyn Anderson Senior, Applied Social Science (Economics)

Advisor: Dr. Zach Raff

Abstract

This study explored the impact of Uber, a ride-sharing platform, on the average taxi fare in various markets. Using data from Taxifarefinder.com, I collected taxi fares for hundreds of markets across the U.S. Specifically, I collected the average one-mile, five-mile, and 10-mile fares in each individual market. Controlling for regional differences and population, I estimated the difference in fare between taxi markets where Uber was present and those where Uber was not present. The empirical results suggest that the availability of the Uber platform reduces the average 10-mile ride by $2.35.

Keywords: Uber, ride-sharing, taxi fare, pricing, disruptive business models

Introduction

A rapid acceleration of technology and growth of consumers using apps and smartphones has occurred in the past decade. Innovative businesses have formed and captured consumers’ attention at an entirely new level. One of these businesses, Uber, is an example of an inventive application (hereafter “app”) to take advantage of this technology expansion. The Uber app is one of the several apps that is part of the sharing economy, which has recently taken off in the world of technology. Although Uber itself does not own any vehicles, the app and its service provide a transportation network which connects riders and drivers in place of taxis (MarketLine, 2014). Since its founding in 2009, Uber has seen rapid growth and now serves hundreds of cities worldwide. Today, Uber is only one of the many companies within the ride-sharing industry. Such technology companies have powerful advantages over the taxi industry, including the ability to avoid costs, e.g., taxes, associated with transportation services and governmental regulations placed on taxis. Ride-sharing platforms continue to insist that they are technology innovators, not transportation providers, so they bend the rules to maximize market share, and ultimately, profits (Meitrodt, 2017). Uber faces increasing legal battles from state governments and the taxi industry; many cities in the U.S. have implemented Uber bans (Edelman & Geradin, 2016).