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Science & Technology Policy Institute (과학기술정책연구원)
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The Emergence of the Sharing Economy: The Response Strategies of Pre-existing Taxi Industry Affected by Uber's Disruption

  • Kim, Kibum (Technology Management, Economics and Policy Program (TEMEP), Seoul National University) ;
  • Lee, Jeong-Dong (Technology Management, Economics and Policy Program (TEMEP), Seoul National University)
  • Published : 2016.10.31
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Abstract

What impact does the sharing economy have on existing businesses? This paper empirically examines how Uber transformed the taxi industry in New York City. Using a regression model controlling various potential influencing factors, we find no direct evidence that daily trips or revenue per taxi driver decreased since Uber entered the taxi industry. However, a closer investigation into other dimensions of taxi trips reveals that taxi drivers were forced to change their way of doing businesses to retain existing daily trips and revenue. Since Uber crowded out yellow taxis from the central area of Manhattan, yellow taxis responded by serving customers outside of the Manhattan borough. From enlarging their geographical coverage and serving customers that were previously ignored, yellow taxis were able to retain their previous level of taxi trips and market share. We also find that yellow taxis responded by improving their service quality to better serve customers' needs. Our result suggests that incumbents actively responded to Uber's entry and provided substantial benefit to consumers. Combined with the incumbent's response, the sharing economy transformed the existing market in a welfare-enhancing way. This paper provides managerial and policy implication on how incumbents affected by the disruptions of the sharing economy should respond. Even though it might be yet premature to examine the impact of Uber, results suggest that incumbents have effectively defended against Uber's entry so far. We conclude that the sharing economy and the existing economy can create positive value in our society through well-intentioned competition, complementing each other's weaknesses and strengths.

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References

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