Uber Economics: Evaluating the Monetary and Travel Time Trade-Offs of Transportation Network Companies and Transit Service in Chicago, Illinois

Abstract

The potential diversion of passengers from public transit to transportation network companies (TNCs) is attracting considerable attention in metropolitan regions. Despite this, relatively little microeconomic analysis has been made available to explore how service attributes affect choices between the services offered by TNCs and public transit. To fill this shortfall, this study evaluates prices and service levels for Lyft, Lyft Line, UberX, UberPool, and Chicago Transit Authority (CTA) services in Chicago. Analysis of 3,075 fares and estimated travel times for 620 trips in the 4- to 11-mile range shows TNCs tend to be relatively costly when expressed in relation to the additional amount spent per unit of time saved. The average traveler using these four TNC services, across the entire sample, spends the equivalent of $42–$108 per hour saved—well above the $14.95/hr. the U.S. Department of Transportation (U.S. DOT) recommends assigning to the average transit passenger when conducting analyses about the value of time. However, for travelers on business and those between locations poorly served by transit, including trips between neighborhoods with less transit service than the downtown district, the analysis shows a significant share of passengers will likely find TNCs cost-effective options based on the U.S. DOT standard. The approach taken illustrates how the mobility benefits and competitive issues associated with TNCs can be systematically evaluated by reviewing the price and travel time characteristics of each trip.