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Price dispersion in the rideshare industry : a study of the Mexico City market

Author

Listed:
  • Sullivan, Tom

    (Monash University)

Abstract

Nascent and highly dynamic industries such as the rideshare industry have disrupted traditional industries and business models. The use of technology has allowed firms like Uber and Didi to compete over both consumers and workers on an increasingly sophisticated level. This paper explores the use of algorithmic pricing strategies employed by the rideshare industry and the impact of such strategies on the overall level of competition in the market. It uses the Mexico City, Mexico, rideshare industry as a case study. The paper shows that specific firms target specific consumers based on whether those consumers are informed or uninformed about other options in the market, and do so at specific times based on the level of demand in the market. The findings of the paper are relevant for both economic understanding of such markets as well as policy responses.

Suggested Citation

  • Sullivan, Tom, 2022. "Price dispersion in the rideshare industry : a study of the Mexico City market," Warwick-Monash Economics Student Papers 40, Warwick Monash Economics Student Papers.
    • Handle: RePEc:wrk:wrkesp:40
    as

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    File URL: https://warwick.ac.uk/fac/soc/economics/research/wmesp/manage/40_-_tom_sullivan.pdf
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    References listed on IDEAS

    as
    1. Baylis, Kathy & Perloff, Jeffrey M., 2001. "Price Dispersion on the Internet: Good Firms and Bad Firms," Institute for Research on Labor and Employment, Working Paper Series qt2t0770rn, Institute of Industrial Relations, UC Berkeley.
    2. Steven Salop & Joseph Stiglitz, 1977. "Bargains and Ripoffs: A Model of Monopolistically Competitive Price Dispersion," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 44(3), pages 493-510.
    3. Diego Aparicio & Zachary Metzman & Roberto Rigobon, 2021. "The Pricing Strategies of Online Grocery Retailers," NBER Working Papers 28639, National Bureau of Economic Research, Inc.
    4. Baylis, Kathy & Perloff, Jeffrey M., 2001. "Price Dispersion on the Internet: Good Firms and Bad Firms," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt2t0770rn, Department of Agricultural & Resource Economics, UC Berkeley.
    5. Kathy Baylis & Jeffrey Perloff, 2002. "Price Dispersion on the Internet: Good Firms and Bad Firms," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 21(3), pages 305-324, November.
    6. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Rideshare ; Uber ; algorithm ; pricing ; competition ; consumer JEL Classification: D4 ; L1;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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