The Value of Time: A High-Frequency Analysis of Ride-Hail Auctions

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Abstract:

We use detailed consumer choice data from a large ride-hailing application to study consumer valuations of time. This application offers a unique mechanism that allows taxi drivers in the Czech Republic to bid on trips, and allows consumers to choose between a set of characteristics of a ride: price, waiting time  (based on the distance from consumers to each available taxi), car type and driver ratings. We observe the tradeoffs consumers face between prices and waiting times across 1.9M ride requests and 5M bids, as well as their ultimate selection. We leverage rich variation in bids and customer choices to directly measure consumer willingness-to-pay for time savings and decompose it further by time-of-day and location. Baseline estimates from Prague show the value of waiting to exceed median wages; from $0.40 per minute in peak weekday morning hours, to $0.05 per minute in off-peak weekend hours. Waiting times are important to explain customers' choices, on average accounting for 13.7 percent of total valuation. We use our preference estimates to quantify the welfare benefits of offering a menu of time and price options. Our results show that a flexible menu of waiting time and choices improves welfare by up to 48 percent over a more standard dispatch mechanism.