Imagine you are a taxi cab driver. One of your goals is to have a paying passenger in your car as often as possible. If you spend all of your time by yourself, you won’t make any money and may sustain a lot of cost driving around looking for fares.
According to a recent paper, Uber drivers are much more likely to be transporting paying passengers than taxi cabs, representing a major competitive advantage. Princeton University researchers Judd Cramer and Alan Krueger found that the overall capacity utilization rate for Uber drivers is thirty eight percent higher for Uber drivers than for cab drivers.
Here’s what that means. As an example, in Los Angeles, traditional taxi drivers have a passenger in their car for about forty one percent of the miles they drive. By contrast, Uber drivers have a passenger for more than sixty four percent of their miles, which translates into a capacity utilization rate fifty eight percent higher.
As reported by Bloomberg, Uber drivers are 41 percent more productive in Seattle. Given their productivity advantage, the average Uber driver could charge 28 percent less than traditional taxes and still earn the same amount per hour.
