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Notching for Free: Do Cyclists Reveal the Value of Time?

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  • Wichman, Casey

    (Resources for the Future)

  • Cunningham, Brandon

Abstract

We explore a nonlinear, "notched" pricing structure in a novel market—urban bike-sharing—to identify how inframarginal price changes affect consumer behavior. By observing cyclists extending their trips to avoid a discontinuous price increase, we are able to estimate a time-for-money trade-off directly for both commuting and recreational trips. Although our estimation strategy reveals an estimate of consumers' opportunity cost of time under neoclassical assumptions, we find that a 400% price increase does not affect behavior in a meaningful way. This result suggests consumers respond more strongly to quantity signals, which has direct implications for nonlinear pricing in other settings.

Suggested Citation

  • Wichman, Casey & Cunningham, Brandon, 2017. "Notching for Free: Do Cyclists Reveal the Value of Time?," RFF Working Paper Series 17-17, Resources for the Future.
    • Handle: RePEc:rff:dpaper:dp-17-17
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    File URL: https://www.rff.org/documents/1781/RFF20WP-17-17.pdf
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