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Economics of the international ridesharing services - a trap for amateurs

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  • Aleksandr Ključnikov

    (Pan-European University, Slovakia)

  • Boris Popesko

    (Tomas Bata University in Zlín, Czech Republic)

  • Jitka Kloudová

    (College of Entrepreneurship and Law, Czech Republic)

Abstract

An explosively growing international business model of peer-to-peer ridesharing brings benefits to the customers and provides part-time and full-time jobs for the drivers. While the services are provided mostly by the drivers with low knowledge of economics and finance, provision of the services might be a trap for them in case that they do not take into consideration all costs related to the service provision. The aim of the study was to investigate the economics of the ridesharing providers in case of UBER in Prague, and to create a simulation model estimating the annual performance of the ridesharing transport service operators and classic taxi service from the point of view of individual drivers, considering certain deviations and random effects defined by the stochastic methods using Monte Carlo approach. The results of the modelling show that the net income of Uber drivers is compatible with the taxi drivers only in case of the most expensive Uber Black category, but the net income of ridesharing providers in the category of Uber Pop and Uber Select hardly covers the costs of service provision. The alarming fact is that most of the drivers, who took part in our research, were not capable to acknowledge the hidden costs of ridesharing and were blinded by the vision of a short-term cash incomes without any awareness of the existence of the postponed or implicit costs. While our results confirm that Uber drivers in general are significantly underpaid, Uber Pop and Uber Select services generate a loss for the driver when we take into account the implicit costs of the driver's salary at the level of an average salary in the Czech Republic.

Suggested Citation

  • Aleksandr Ključnikov & Boris Popesko & Jitka Kloudová, 2019. "Economics of the international ridesharing services - a trap for amateurs," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 6(3), pages 1172-1181, March.
    • Handle: RePEc:ssi:jouesi:v:6:y:2019:i:3:p:1172-1181
    DOI: 10.9770/jesi.2019.6.3(8)
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • K20 - Law and Economics - - Regulation and Business Law - - - General
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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