Battle of Sharing Economy: The Contingent Effects of Ride-Sharing on Taxi Industry

Abstract

With the rapid growth of sharing economy, there has been a bitter controversy on the disruptive nature of sharing economy to threaten traditional industry. This study examines the impact of ride-sharing services, which is one of the most successful business models in sharing economy, on taxi industry. Using comprehensive data on Uber and taxi transactions in New York City from April to September 2014, we find that ride-sharing is negatively associated with the demand for taxis. Interestingly, this effect is contingent upon market- and customer-segments. The negative effect of Uber on taxis is mostly driven in Manhattan and high-income areas, where most taxis are concentrated. Furthermore, our analyses reveal that ride-sharing services take more demand of taxi customers who pay by cash and who are price-sensitive, by providing relative advantages of ride-sharing platforms. In addition, taxi customers in groups appear to more switch to ride-sharing services. Relevant implications for both research and practice are discussed.