Effort under alternative pay contracts in the ride-sharing industry

Abstract

We study hours worked by drivers in the peer-to-peer transportation sector with cross-side network effects. Medallion lease (regulated market), commission-based (Uber-like pay) and profit-sharing ("pure" taxi coop) compensation schemes are compared. Our static model shows that network externalities matter, depending on the number of active drivers. When the number of drivers is limited, in the presence of positive network effects, a regulated system always induces more hours worked, while the commission fee influences the comparative incentives towards effort of Uber-like pay versus profit-sharing. When the number of drivers is infinite (or close to it), the influence of network externalities on optimal effort vanishes