Policies Restricting Ride-Hailing Apps Can Harm Transportation Ecosystem, UF Study Shows

New research from the University of Florida has revealed that policies that limit the use of ride-hailing apps like Uber and Lyft can have negative consequences for a city’s transportation ecosystem. In 2015, the city of Shanghai implemented a policy restricting the use of ride-hailing apps during rush hour for 12% of the taxi fleet to address issues with riders hailing cabs on the streets.

The Study

Kyung Sun (Melissa) Rhee, a professor at the UF Warrington College of Business, led a study with Jinyang Zheng, Youwei Wang, and Yong Tan to analyze the impact of this regulation on drivers, customers, and the city’s transportation network. The researchers found that the policy had unintended consequences, resulting in a decrease in taxi ridership, an increase in traffic congestion, and a decline in driver profits.

Results

Restricting information sharing via ride-hailing apps during rush hour led to a 4.7% decrease in taxi rides and a 2.8% decline in driver profits. Public transportation saw a slight increase in ridership, ranging from 0.4% to 0.9% depending on the mode of transit. Some taxi rides were shifted to occur before or after the restricted period, ultimately increasing congestion.

Implications

While Shanghai’s highly regulated taxi industry works differently from how Uber and Lyft operate in the U.S., the study shows the importance of information provided by ride-hailing apps in increasing the efficiency of transportation systems. The same concept applies to other two-sided platforms that connect customers to suppliers, such as Grubhub for food or Freelancer.com for workers.

The researchers suggest that policymakers consider the spillover effects on other areas when regulating an industry. They caution that policies that intend to protect customers can have negative consequences on drivers and the overall transportation ecosystem.

In light of this study, it is important for policymakers to consider the impact of regulations on all stakeholders and to seek solutions that balance the needs of both drivers and customers while promoting efficiency and sustainability in the transportation industry.