Evaluation of Ride-Sourcing Search Frictions and Driver Productivity: A Spatial Denoising Approach

TL;DR

This study develops a spatial denoising framework to measure and analyze the significant spatial and temporal variations in driver productivity and search frictions in ride-sourcing, highlighting the impact of trip distance and surge pricing.

Contribution

It introduces a novel analytic framework combining a new productivity metric, a natural experiment, and spatial denoising to accurately assess spatial disparities in driver earnings.

Findings

Significant spatial variation in driver productivity across Austin.

Trip distance is the main factor affecting productivity.

Surge pricing increases earnings disparities.

Abstract

This paper considers the problem of measuring spatial and temporal variation in driver productivity on ride-sourcing trips. This variation is especially important from a driver's perspective: if a platform's drivers experience systematic disparities in earnings because of variation in their riders' destinations, they may perceive the pricing model as inequitable. This perception can exacerbate search frictions if it leads drivers to avoid locations where they believe they may be assigned "unlucky" fares. To characterize any such systematic disparities in productivity, we develop an analytic framework with three key components. First, we propose a productivity metric that looks two consecutive trips ahead, thus capturing the effect on expected earnings of market conditions at drivers' drop-off locations. Second, we develop a natural experiment by analyzing trips with a common origin but varying destinations, thus isolating purely spatial effects on productivity. Third, we apply a spatial denoising method that allows us to work with raw spatial information exhibiting high levels of noise and sparsity, without having to aggregate data into large, low-resolution spatial zones. By applying our framework to data on more than 1.4 million rides in Austin, Texas, we find significant spatial variation in ride-sourcing driver productivity and search frictions. Drivers at the same location experienced disparities in productivity after being dispatched on trips with different destinations, with origin-based surge pricing increasing these earnings disparities. Our results show that trip distance is the dominant factor in driver productivity: short trips yielded lower productivity, even when ending in areas with high demand. These findings suggest that new pricing strategies are required to minimize random disparities in driver earnings.