What Drives Taxi Drivers? Definition an expert seller knows more about the quality a consumer needs than the consumer herself Examples repair services (cars, computers) medical treatments Problem: the expert can cheat overtreatment - providing a unnecessarily high quality undertreatment - providing a too low quality overcharging - charging unjustifiably much 1 Expert Services – Credence Goods

What Drives Taxi Drivers? Theory Darby and Karni (1973) Dulleck and Kerschbamer (2006) Experiments in the lab Dulleck, Kerschbamer, and Sutter (2010) Field data Hughes and Yule (1992), Gruber and Owings (1996), Gruber et al. (1999), Izuka (2007): medicine Schneider (2009): car repairs Problems with data collection, control Our solution: Natural field experiment in the taxi market 2 Expert Services – Literature

What Drives Taxi Drivers? Literature on labor supply of taxi drivers (Camerer et al., 1997; Farber, 2005; Farber, 2008, Crawford and Meng, 2011), and on stopping behavior of taxi drivers (Gambetta and Hamill, 2005) however, little is known about the actual product taxi drivers sell – an expert service! Possible types of fraud overtreatment = taking longer route overcharging = charging more than justified by chosen route (e.g. night tariff, fictional fares etc.) undertreatment ruled out 3 Taxi services

What Drives Taxi Drivers? H1: Information about city passengers who are not familiar with the city are more likely to face overtreatment H2: Information about fares passengers who are not familiar with the fares are more likely to face overcharging H3: Income high-income passengers receive worse service than low-income passengers Research Question – Hypotheses 4

What Drives Taxi Drivers? Treatment design: 3x2 174 taxi rides in Athens, Greece 5 Treatments local nativenon-local nativeforeigner low income29 high income29

What Drives Taxi Drivers? The experiment three experimenters (all male in their mid-late twenties) manipulation of origin simultaneous observations: same starting point, same destination, different roles create reference point with local native randomization over routes, days, and time 6 Method

What Drives Taxi Drivers? High income wearing suit top-end hotel Low income shabby clothes low-end accommodation 7 Method – Signaling Income

What Drives Taxi Drivers? keeping track of fraud GPS-logger records exact position every single second allows reconstructing exact route, duration etc. 8 Method – GPS Logger

What Drives Taxi Drivers? Facts 15 routes 63 h net driving time 2,236 km net travelled distance ( Innsbruck to Damascus) 13 km mean trip distance 22 min mean trip lenght 3% female drivers 42% Skoda, 30% Toyota 9 Method

What Drives Taxi Drivers? 10 Method – Routes

What Drives Taxi Drivers? 11 Example for Overtreatment

What Drives Taxi Drivers? 12 Example for Overtreatment OT-index: 1.43 additional distance: 4.2km

What Drives Taxi Drivers? 13 Example for Overcharging price-index: 1.61 additional fare: 9.5 local non-localforeigner

What Drives Taxi Drivers? 14 Results – Origin of Customer localsnon-localsforeigners price-index %+9.3% / +14.2%

What Drives Taxi Drivers? localsnon-localsforeigners OT-index %+-0 / +5.4% 15 Results – Origin of Customer

What Drives Taxi Drivers? 16 Results – Origin of Customer localsnon-localsforeigners OC frequency %+567% / +850%

What Drives Taxi Drivers? 17 Results – Income of Customer price-indexlocalsnon-localsforeignerstotal low income high income

What Drives Taxi Drivers? 18 Results – Income of Customer OT-indexlocalsnon-localsforeignerstotal low income high income

What Drives Taxi Drivers? 19 Results – Income of Customer OC frequencylocalsnon-localsforeignerstotal low income high income

What Drives Taxi Drivers? (1) Price Index (2) Overtreatment Index (3) Overcharging Dummy nonlocal 0.101** (0.051) 0.093*** (0.035) (0.027) foreign 0.147*** (0.054) (0.024) *** (0.045) rich (0.045) 0.060** (0.026) (0.045) timezone (0.003) ** (0.002) ** (0.003) Additional controlsYes Results – Econometric Analysis 20

What Drives Taxi Drivers? Overtreatment: more extensive for passengers who are not from the city (H1) Overcharging: more common for foreigners (H2) Income: Partial effects only (overtreatment) (Some) taxi drivers know whom to cheat and how to cheat! 21 Conclusion

What Drives Taxi Drivers? Thank you! 22