An Efficiency Paradox of Uberization
Yu (Marco) Nie
Civil and Environmental Engineering, Northwestern University
ABSTRACT: Uberization promises to transform society based on an intuitive proposition: Advanced peer-to-peer matching guarantees greater overall efficiency. Nie challenges this proposition in uberized ride-hail service through an ananlysis of a service called e-hail. By analyzing hundreds of local markets in Shenzhen, China, Nie discovered e-hail is outperformed &emdahs; in terms of wait time and trip production — by taxis hailed off the street in areas with high densities of passengers and drivers. This paradox arises because a quicker match does not always expedite and enhance a ride-hail service. On the contrary, quick match can induce competition that undermines the network effect, making a passenger less likely to benefit from more drivers, and vice versa, in e-hail service compared to taxi service. Consequently, simply attracting more users may not improve e-hail’s efficiency because its competitive edge diminishes with scale. The finding implies uberization has a limited impact on efficiency and is unlikely to create a “winner-take-all” in transportation.
