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Creative destruction of the sharing economy in action: The case of Uber

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  • Kim, Kibum
  • Baek, Chulwoo
  • Lee, Jeong-Dong

Abstract

This research aims to empirically examine how Uber has transformed the traditional taxi industry in New York. To this end, we employed a time-series regression model, controlling for various factors that may affect taxi trips, and found no direct evidence that the number of taxi trips, the revenue per driver, or occupancy rates have decreased since Uber entered the market. However, a closer investigation into other dimensions, specifically the degree of dispersion of pick-up and drop-off locations, reveals that taxi drivers have been forced to change their way of conducting business in order to retain their market position. Since Uber has crowded out taxis from the central area of Manhattan, the latter have actively responded by serving customers outside of this area. By increasing their geographic coverage and serving customers that were previously ignored, taxis were able to retain their numbers for trips and market share. Our results suggest that the incumbent taxi drivers actively responded to the disruptive threat of Uber’s entry and have consequently provided substantial benefits to consumers as taxis can now be hailed from a wider area of New York. We thus found that the sharing economy has transformed the existing market in a positive and welfare-enhancing way.

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  • Kim, Kibum & Baek, Chulwoo & Lee, Jeong-Dong, 2018. "Creative destruction of the sharing economy in action: The case of Uber," Transportation Research Part A: Policy and Practice, Elsevier, vol. 110(C), pages 118-127.
  • Handle: RePEc:eee:transa:v:110:y:2018:i:c:p:118-127
    DOI: 10.1016/j.tra.2018.01.014
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    References listed on IDEAS

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    5. Wells, Peter & Wang, Xiaobei & Wang, Liqiao & Liu, Haokun & Orsato, Renato, 2020. "More friends than foes? The impact of automobility-as-a-service on the incumbent automotive industry," Technological Forecasting and Social Change, Elsevier, vol. 154(C).
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    7. Guangyu Cao & Ginger Zhe Jin & Xi Weng & Li‐An Zhou, 2021. "Market‐expanding or Market‐stealing? Competition with network effects in bike‐sharing," RAND Journal of Economics, RAND Corporation, vol. 52(4), pages 778-814, December.
    8. Andrzej Bąk & Elżbieta Nawrocka & Daria E. Jaremen, 2022. "“Sustainability” as a Motive for Choosing Shared-Mobility Services: The Case of Polish Consumers of Uber Services," Sustainability, MDPI, vol. 14(10), pages 1-21, May.
    9. Georgina Santos, 2018. "Sustainability and Shared Mobility Models," Sustainability, MDPI, vol. 10(9), pages 1-13, September.
    10. Yang Si & Hongzhi Guan & Yuchao Cui, 2019. "Research on the Choice Behavior of Taxis and Express Services Based on the SEM-Logit Model," Sustainability, MDPI, vol. 11(10), pages 1-13, May.
    11. Yiyuan Ma & Ke Chen & Youzhi Xiao & Rong Fan, 2022. "Does Online Ride-Hailing Service Improve the Efficiency of Taxi Market? Evidence from Shanghai," Sustainability, MDPI, vol. 14(14), pages 1-16, July.
    12. Mizan Rahman & Sunny Bose & Mujahid Mohiuddin Babu & Bidit Lal Dey & Sanjit Kumar Roy & Ben Binsardi, 2019. "Value Co-Creation as a Dialectical Process: Study in Bangladesh and Indian Province of West Bengal," Information Systems Frontiers, Springer, vol. 21(3), pages 527-545, June.
    13. Yves Crozet & Georgina Santos & Jean Coldefy, 2019. "Shared mobility and MaaS: Regulatory challenges of urban mobility," Working Papers halshs-03169805, HAL.
    14. Schippers, Anouk L. & Soetevent, Adriaan R., 2024. "Sharing with minimal regulation? Evidence from neighborhood book exchange," European Economic Review, Elsevier, vol. 161(C).
    15. Aleksandar Shivarov, 2020. "Circular Economy: Limitations of the Concept and Application Challenges," Izvestia Journal of the Union of Scientists - Varna. Economic Sciences Series, Union of Scientists - Varna, Economic Sciences Section, vol. 9(3), pages 144-152, December.
    16. Yuchen Gao & Jingrui Chen, 2019. "The Risk Reduction and Sustainable Development of Shared Transportation: The Chinese Online Car-hailing Policy Evaluation in the Digitalization Era," Sustainability, MDPI, vol. 11(9), pages 1-21, May.
    17. Mikko Hänninen & Anssi Smedlund, 2021. "Same Old Song with a Different Melody: The Paradox of Market Reach and Financial Performance on Digital Platforms," Journal of Management Studies, Wiley Blackwell, vol. 58(7), pages 1832-1868, November.
    18. Maria J. Pouri & Lorenz M. Hilty, 2018. "Conceptualizing the Digital Sharing Economy in the Context of Sustainability," Sustainability, MDPI, vol. 10(12), pages 1-19, November.
    19. Zhicheng Weng & Pinliang Luo, 2021. "Supervision of the Default Risk of Online Car-Hailing Platform from an Evolutionary Game Perspective," Sustainability, MDPI, vol. 13(2), pages 1-19, January.
    20. Honorine Harlé & Pascal Le Masson & Benoit Weil, 2021. "A model of creative heritage for industry: designing new rules while preserving the present system of rules [Un modèle de patrimoine de création pour l'industrie: concevoir de nouvelles règles dans," Post-Print hal-03406761, HAL.
    21. Schippers, Anouk L. & Soetevent, Adriaan R., 2022. "Sharing with Minimal Regulation? Free Riding and Neighborhood Book Exchange," EconStor Preprints 249448, ZBW - Leibniz Information Centre for Economics.
    22. Aghaabbasi, Mahdi & Shekari, Zohreh Asadi & Shah, Muhammad Zaly & Olakunle, Oloruntobi & Armaghani, Danial Jahed & Moeinaddini, Mehdi, 2020. "Predicting the use frequency of ride-sourcing by off-campus university students through random forest and Bayesian network techniques," Transportation Research Part A: Policy and Practice, Elsevier, vol. 136(C), pages 262-281.
    23. Lee, Junmin & Kim, Keungoui & Kim, Jiyong & Hwang, Junseok, 2022. "The relationship between shared mobility and regulation in South Korea: A system dynamics approach from the socio-technical transitions perspective," Technovation, Elsevier, vol. 109(C).

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