Personalized Pricing and the Value of Time: Evidence from Auctioned Cab Rides

We recover valuations of time using detailed data from a large ride-hail platform, where drivers bid on trips and consumers choose between a set of rides with different prices and wait times. Leveraging a consumer panel, we estimate demand as a function of both prices and wait times and use the resulting estimates to recover heterogeneity in the value of time across consumers. We study the welfare implications of personalized pricing and its effect on the platform, drivers, and consumers. Taking into account drivers’ optimal reaction to the platform’s pricing policy, personalized pricing lowers consumer surplus by 2.5% and increases overall surplus by 5.2%. Like the platform, drivers benefit from personalized pricing. ETA-based pricing– where different prices are set for various wait times and where extensive use of consumer data is not required–can capture a significant portion of the profits garnered from personalized pricing, while simultaneously benefiting consumers.