Do Digital Platforms Reduce Moral Hazard? The Case of Uber and Taxis
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.
Published Versions
Meng Liu & Erik Brynjolfsson & Jason Dowlatabadi, 2021. "Do Digital Platforms Reduce Moral Hazard? The Case of Uber and Taxis," Management Science, vol 67(8), pages 4665-4685.
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