A new study by the University of Florida has found that limiting the use of ride-hailing apps such as Uber or Lyft can have a negative impact on the transportation ecosystem of a city. The study analyzes how a policy implemented by the city of Shanghai to restrict the use of ride-hailing apps affected the city’s overall transportation network.

The policy and its impact

In 2015, Shanghai faced an issue where taxi drivers were using ride-hailing apps to find customers, leading to fewer riders being picked up on the streets. In response, the city blacked out the apps during morning and evening rush hour for 12% of the taxi fleet every workday. However, the policy had unintended consequences, resulting in a decrease in taxi ridership and an increase in traffic congestion. Driver profits also fell by 2.8%.

Impact on public transportation

The policy also led to an increase in ridership on public transportation during the restricted period, with an increase from 0.4% to 0.9% depending on the mode of transit. Some taxi rides shifted to happening before or after the restricted period, contributing to increased congestion.

Value of information sharing

The study highlights the value of information provided by ride-hailing apps in increasing the efficiency of the transportation system. The information exchanged between customers and drivers can lead to a more effective use of transportation resources. The same likely applies to other two-sided platforms that connect customers to suppliers, such as Grubhub for food or Freelancer.com for workers.

When policymakers regulate an industry, they need to consider the spillover effects on other areas. The study suggests that policies restricting ride-hailing apps can have unintended consequences that negatively impact the transportation ecosystem. Policymakers need to consider the value of information sharing and how it can lead to a more efficient use of transportation resources.


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