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What is the social value of Uber?
From Tyler Cowen.
"That is my latest column for Bloomberg, here is the method:
Uber calculates figures for surge pricing at times of
high demand, but it rounds off. So a computation of market conditions
that might lead to a surge price that is 1.249 times higher than normal
fares is rounded down to 1.2, but 1.251 would be rounded up to 1.3. Yet
the initial, unrounded 1.249 and 1.251 estimates represent almost the
same underlying market tightness.
Using data from Uber, the authors therefore could see how the demand
for Uber varied with surge prices that vary (say from 20 percent to 30
percent above normal fares) even when market conditions are roughly
constant.
Here is the source:
A new paper by Peter Cohen, Robert Hahn, Jonathan Hall, Steven Levitt…and Robert Metcalfe…
They conclude UberX produces about $6.8 billion in consumer surplus a year. My caveat:
If anything, this method underestimates the worth of
Uber, as it doesn’t capture what economists call “option value.” Let’s
say you walk home with a guy or gal late at night, hoping something nice
will happen. But you’re not quite sure, as he or she might make the
wrong noises about a particular political candidate, and then you would
wish to bail out quickly. Uber would be the safety net. Most of the time
you don’t end up using the service or recording a transaction that
would count for this study, but you can start making plans because you
know you have Uber as a fallback.
Or consider those urban residents
who have ditched their cars altogether. They know they can take Uber to
the local market if they need to, even if most of the time they have
not run out of milk and dog food. Similarly, the existence of Uber is
helping some localities economize on mass transit expenditures.
The study also doesn’t measure how Uber might help get the U.S. to
the next level of market innovation, which in this case might mean a network of on-demand, self-driving vehicles.
Do read the whole thing."
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