Microeconomics Uber vs Taxi Rideshare Drivers Compensation Scheme Questions
UON Microeconomics Uber vs Taxi Rideshare Drivers Compensation Scheme Questions
The assignment is to write an essay about the paper. In the essay you should explain clearly what the article is about. In addition to your own insights, ensure that your essay contains the answers to all the questions that are listed for that particular article. You should highlight where you answer a specific question by inserting brackets with the question number (e.g., [Q14]) in the text, at the beginning of the sentence that starts your answer. Some questions have been posed with the objective of forcing you to include essential information in your essay and to carefully read the paper; other questions are more difficult and aim to test your deeper understanding of the paper. You are encouraged to read related articles and use them for your essay; some questions may ask you specifically about related literature. Be careful not to plagiarize. Citing quotations from the original articles or related articles are allowed, but only if they are short. Also, make sure that quotes are properly cited (that is, the quote should be in between quotation marks, and the author, year, and page number of the source should be indicated). Format: If you want refer to figures and tables in the original article or related articles, you may choose to include these after the reference list at the end. However, for the original article this is not necessary as proper referencing in the main text (“In Figure 3, the authors… etc.”) will guide us which figures and tables you refer to. The essay should be maximum three pages long without this reference list and figures and tables at the end (using a line spacing of 18 pt (=1.5 line spacing in Word), and a font like Calibri or Times New Roman, with a font size of 12). You may use footnotes to provide brief, supplemental information or derivations that do not belong to the core of your text. Grading:
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Angrist, Caldwell and Hall (2021): Uber versus Taxi: A Driver’s Eye View Abstract: Rideshare drivers pay a proportion of their fares to a ride-hailing platform operator, a commissionbased compensation model used by many service providers. To Uber drivers, this commission is known as the Uber fee. By contrast, traditional taxi drivers in most US cities make a fixed payment independent of their earnings, usually a weekly or daily medallion lease, keeping every fare dollar net of lease costs and other expenses. We assess these compensation models using an experiment that offered random samples of Boston Uber drivers opportunities to lease a virtual taxi medallion that eliminates the Uber fee. Some drivers were offered a negative fee. Drivers’ labor supply response to our offers reveals a large intertemporal substitution elasticity, on the order of 1.2, and higher for those who accept lease contracts. At the same time, our virtual lease program was undersubscribed: many drivers who would have benefited from buying an inexpensive lease chose to sit out. We use these results to compute the average compensation required to make drivers indifferent between rideshare and taxi-style compensation contracts. The results suggest that rideshare drivers gain considerably from the opportunity to drive without leasing.
1. (3 points) Derive equation (2) from (1) using a second-order expansion and Shephard’s lemma. At first sight, the expression in (2) seems needlessly complicated with some common terms in numerator and denominator that could be cancelled out – why do the authors feel a need to include them
2. (3 points) Derive equation (4) for the Compensating Variation and give the intuition for this expression. What is the impact of higher values of δ on the CV and hence the preference for Taxi over Rideshare?
3. (3 points) There are more than 20,000 Uber drivers in Boston at the time of the study, but the authors decide that only drivers who drive between an average of 5 to 25 hours a week in the four weeks preceding the selection period. Which reason(s) do the authors cite for this selection? Do you consider this a good reason and/or can you identify some disadvantages?
4. (2 points) Consider Table 2. Why is the likely reason that the Rates in column (7) are lower for Wave 2?
5. (3 points) What are the main effects on the outcomes of the 1,031 drivers that participate in Earnings Accelerator?
6. (3 points) Explain why Figure 7 suggests that the Uber drivers, when they increase their number of hours, earn about a similar hourly wage as the one they receive for their initial hours of work? Do the estimates give an indication whether the implemented treatments impact life-time wealth?
7. (3 points) Of the 1,600 drivers offers the fee-free riding, only 1,031 accept. One problem is that these 1,031 drivers who self-select into treatment may derive higher benefits from fee-free riding than those who opt out. This would bias the estimated treatment effect upward. Why is this not a concern in the estimates of Earnings Accelerator participation in Figure 7?
8. (3 points) Explain intuitively equation (15).
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