CFDP 2219

Spatial Distribution of Supply and the Role of Market Thickness: Theory and Evidence from Ride Sharing

Author(s): 

Publication Date: January 2020

Pages: 70

Abstract: 

This paper develops a strategy with simple implementation and limited data requirements to identify spatial distortion of supply from demand -or, equivalently, unequal access to supply among regions- in transportation markets. We apply our method to ride-level, multi-platform data from New York City (NYC) and show that for smaller rideshare platforms, supply tends to be disproportionately concentrated in more densely populated areas. We also develop a theoretical model to argue that a smaller platform size, all else being equal, distorts the supply of drivers toward more densely populated areas due to network effects. Motivated by this, we estimate a minimum required platform size to avoid geographical supply distortions, which informs the current policy debate in NYC around whether ridesharing platforms should be downsized. We nd the minimum required size to be approximately 3.5M rides/month for NYC, implying that downsizing Lyft or Via-but not Uber{can increase geographical inequity.

Keywords: Spatial Markets, Transportation, Geographical Inequity, Market Thickness, Ridesharing

JEL Classification Codes: L13, R41, D62

JEL Classification Codes: L13R41D62

See CFDP Version(s): CFDP 2219R