NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Do Digital Platforms Reduce Moral Hazard? The Case of Uber and Taxis

Meng Liu, Erik Brynjolfsson, Jason Dowlatabadi

NBER Working Paper No. 25015
Issued in September 2018
NBER Program(s):Productivity, Innovation, and Entrepreneurship

Digital platforms like Uber can enhance market transparency and mitigate moral hazard via ratings of buyers and sellers, real-time monitoring, and low-cost complaint channels. We compare driver choices at Uber with taxis by matching trips so they are subject to the same optimal route. We also study drivers who switch from taxis to Uber. We find: (1) drivers in taxis detour about 7% on airport routes, with non-local passengers experiencing longer detours; (2) these detours lead to longer travel times; and (3) drivers on the Uber platform are more likely to detour on airport routes with high surge pricing.

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Document Object Identifier (DOI): 10.3386/w25015

 
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