Research

• Change in Online Taxi Drivers’ Labor Supply: Experience or Price Effect? Evidence from Tapsi. [Paper] [Slides]
  • Abstract: This paper quantitatively studies the dynamics of online taxi drivers’ labor supply decisions by exploiting two unique ride dispatching characteristics of Tapsi, an Iranian ride-hailing company. I model Tapsi’s ride acceptance environment for drivers within a continuous-time search and matching framework. I show how drivers’ subjective beliefs about goodness of ride prices, what I call the “experience” component, will affect ride acceptance behavior in this setup. I leverage Tapsi’s surge pricing mechanism in a regression discontinuity setup to decompose the effect of exogenous price shocks on drivers’ labor supply into two components: (1) pure price effect, and (2) experience effect. This decomposition allows us to address the intrinsic endogeneity in taxi drivers’ labor supply elasticity measurement by separating the pure effect of price shocks from the endogenous component whereby drivers tend to self-select themselves into areas with more favorable earning conditions. In simulations, I show how this decomposition explains heterogeneous responses to similar ride offers not only from different drivers but also from the same driver at different times.