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Working Time under Alternative Pay Contracts in the Ride-Sharing Industry

  • Filippo Belloc EMAIL logo
Veröffentlicht/Copyright: 5. Oktober 2020
The B.E. Journal of Theoretical Economics
Aus der Zeitschrift The B.E. Journal of Theoretical Economics Band 22 Heft 1

Abstract

We study hours worked by drivers in the peer-to-peer transportation sector with cross-side network effects. Medallion lease (regulated market), commission-based (Uber-like pay) and profit-sharing (“pure” taxi coop) compensation schemes are compared. Our static model shows that network externalities matter, depending on the number of active drivers. When the number of drivers is limited, in the presence of positive network effects, a regulated system always induces more hours worked, while the commission fee influences the comparative incentives towards working time of Uber-like pay versus profit-sharing. When the number of drivers is infinite (or close to it), the influence of network externalities on optimal working time vanishes. Our model helps identifying which is the pay scheme that best remunerates longer working times and offers insights to regulators seeking to improve the intensive margin of coverage by taxi services.

Keywords: working time; Uber; network effects; ride-sharing; pay schemes
JEL classification: L91; J22; J33
Corresponding author: Filippo Belloc, Department of Economics and Statistics, University of Siena, Piazza San Francesco 7, 53100 Siena, Italy, E-mail:

Acknowledgments

The content of this paper previously circulated as part of a larger working paper titled “Why isn’t Uber Worker-Managed?”, which was presented at the 2019 CESifo Workshop on the Gig Economy (San Servolo – Venice). I wish to thank the participants to this Workshop for valuable suggestions. I am also grateful to participants at the 2018 IAFEP Conference (Lubjiana), the 2018 SIE Conference (Bologna), the 2019 STILE Workshop (Rome) and participants at the Economic Seminar Series at the University of Parma. The usual disclaimers apply.

Appendix

A.1 Proof of Proposition 1

As for the first part of Proposition 1, by comparing Equations (4) and (6) and manipulating, it is straightforward to observe that, for any φ > 0, h i m > h i e when p ( h i , h L − 1 ) + p ′ ( h i , h L − 1 )   h i > 0 . This is verified for any p ′ ( h i , h L − 1 ) > 0 and when | p ( h i , h L − 1 ) | > | p ′ ( h i , h L − 1 )   h i | . As for the second part of Proposition 1, we need to compare Equations (4) and (8). We obtain that h i m > h i w when p ( h i , h L − 1 ) + p ′ ( h i , h L − 1 )   h i > p ( h i , h L − 1 ) / L + p ′ ( h i , h L − 1 )   h i , with h i  = h. This always holds if L > 1.

A.2 Proof of Proposition 2

Manipulating Equation (10), φ ‾ can be expressed as 1 − ( 1 / L ) − δ + ( δ / L ) , with δ = [ p ′ ( h )   h i ] / [ p ( h ) + p ′ ( h )   h i ] . When h < h ‾ , p ′ ( h ) > 0 . Thus, we have that 0 < δ < 1. This implies that 1 − ( 1 / L ) − δ + ( δ / L ) < 1 .

A.3 Proof of Proposition 3

Denote again [ p ′ ( h )   h i ] / [ p ( h ) + p ′ ( h )   h i ] with δ. Then, from φ ‾ = 1 − ( 1 / L ) − δ + ( δ / L ) it results that φ ‾ = 1 when δ is lower than zero and precisely equal to 1/(1 − L). δ < 0 when p ′ ( h ) < 0 , that is when h > h ‾ .

A.4 Proof of Proposition 4

As for the first part of Proposition 4, it is sufficient to notice that Equations (11)–(13) do not include p ′ ( h ) . As for the second part of Proposition 4, we need to compare Equations (11)–(13). With φ > 0, h i M > h i E . Moreover, h i E > h i W when ( 1 − φ )   p ( h ) > p ( h ) / L , i.e. when φ < ( L − 1 ) / L , with lim L → ∞ ( L − 1 ) / L = 1 .

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Received: 2020-02-18
Accepted: 2020-09-02
Published Online: 2020-10-05

© 2022 Walter de Gruyter GmbH, Berlin/Boston

Artikel in diesem Heft

  1. Frontmatter
  2. Research Articles
  3. On the Microfoundation of Linear Oligopoly Demand
  4. Uncertain Outcomes and Climate Change Policy Using an Expo-Power Utility Function
  5. Price Versus Quantity Competition in a Vertically Related Market with Retailer’s Effort
  6. Search Costs and Wage Inequality
  7. Product Differentiation in a Vertical Structure
  8. Corporate Profit Tax and Strategic Corporate Social Responsibility Under Foreign Acquisition
  9. Examining the Impact of Electoral Competition and Endogenous Lobby Formation on Equilibrium Policy Platforms
  10. Entry Deterrence and Free Riding in License Auctions: Incumbent Heterogeneity and Monotonicity
  11. When is Knowledge Acquisition Socially Beneficial in the Laffont–Tirole Regulatory Framework?
  12. Notes
  13. Long-Run Growth, Speed of Convergence and the Specification of Technology
  14. Working Time under Alternative Pay Contracts in the Ride-Sharing Industry
  15. Tacit Collusion with Consumer Preference Costs
  16. Competitively-Issued Convertible Bank Notes in a Theory of Finance: Earl Thompson Meets Fischer Black
https://doi.org/10.1515/bejte-2020-0026
Schlagwörter für diesen Artikel
working time; Uber; network effects; ride-sharing; pay schemes

Artikel in diesem Heft

  1. Frontmatter
  2. Research Articles
  3. On the Microfoundation of Linear Oligopoly Demand
  4. Uncertain Outcomes and Climate Change Policy Using an Expo-Power Utility Function
  5. Price Versus Quantity Competition in a Vertically Related Market with Retailer’s Effort
  6. Search Costs and Wage Inequality
  7. Product Differentiation in a Vertical Structure
  8. Corporate Profit Tax and Strategic Corporate Social Responsibility Under Foreign Acquisition
  9. Examining the Impact of Electoral Competition and Endogenous Lobby Formation on Equilibrium Policy Platforms
  10. Entry Deterrence and Free Riding in License Auctions: Incumbent Heterogeneity and Monotonicity
  11. When is Knowledge Acquisition Socially Beneficial in the Laffont–Tirole Regulatory Framework?
  12. Notes
  13. Long-Run Growth, Speed of Convergence and the Specification of Technology
  14. Working Time under Alternative Pay Contracts in the Ride-Sharing Industry
  15. Tacit Collusion with Consumer Preference Costs
  16. Competitively-Issued Convertible Bank Notes in a Theory of Finance: Earl Thompson Meets Fischer Black
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