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The Impact of Gasoline Prices on DrivingBehaviors of NYC Taxi Drivers
SangUk Nam
University of Arizona
June 17, 2017
SangUk Nam (University of Arizona) NYC Taxi June 17, 2017 1 / 22
Overview
Rebound effect in NYC taxiUsually, rebound effect is considered as negative factor because ofincreased emission.In commercial transportation, rebound effect implies increasedsupply.
NYC taxi industryNYC taxi industry is highly restricted in supply side.Only 13,437 vehicles are allowed to operate as taxi.The rebound effect decreases welfare loss from limitation of supply.
Research QuestionIs the impact of gas price on NYC driver different according tovehicle efficiency?
SangUk Nam (University of Arizona) NYC Taxi June 17, 2017 2 / 22
NYC taxi
The largest taxi industry in U.S.A.over 50,000 drivers485,000 trips per day600,000 customer per day70,000 mile per year
NYC taxi industry is highly regulated.The permits (Medallion) are limited as 13,437Fare is fixed by NYC Taxi Limousine Commission (TLC)Only yellow cabs can only be hailed in Manhattan.
Competition was increased but impact was smallBoro taxi was introduced in Aug. 2013 but the number of trips wasvery small .Uber was introduced in 2012 but the market share was small- Even in 2015, E-hail vehicle’s(Uber) market share was 15%
SangUk Nam (University of Arizona) NYC Taxi June 17, 2017 3 / 22
Does driver need to care about fuel costs?
Risk of gas price fluctuation is belonged to driver.
Fixed Rental Fee
Individual rental fee is constant $100 per Shift.It is not varied by vehicle model and gas price.
Fixed FareTLC controls fare system.In Sep 2012, fare was increased as current level.
"When gas hits $4.50 a gallon, it can make it hard for a driver topay the rent and put food on the table,"- Taxi and Limousine Commission (TLC) Chairman David Yassky(April 27, 2011. Daily News)
SangUk Nam (University of Arizona) NYC Taxi June 17, 2017 4 / 22
Taxi Substitute
SubstitutionLike private vehicles, NYC taxis have been substituted as hybridvehicles.
Table: Most Frequent Model in Each Bin
Type Gas-Only Sedan Hybrid SUV Hybrid SedanModel Crown Victoria Escape PriusMPG 19 34 50Length (in) 212.0 174.7 175.6Width (in) 78.3 71.1 68.7Height (in) 58.3 67.9 58.7Horse Power 224 177 132Size (Liter) 4.6 2.5 2.0Proportion of Bin 44.69% 34.50% 20.81%* Ward’s automotive yearbook
SangUk Nam (University of Arizona) NYC Taxi June 17, 2017 5 / 22
Two factors of Supply: Customer Search
Two type of taxi trips: delivery customers or searching customersDelivery customer trip depends on customers.Searching customer trip depends on taxi drivers.
When fuel costs increase, drivers will decrease customersearching distance.
SangUk Nam (University of Arizona) NYC Taxi June 17, 2017 6 / 22
Two factors of Supply: Shift Time
Shift timeWorking hours: time difference between shift start time and endtime.
Decreasing fuel costs increases profit rate.Equivalent with increased wage
When value of leisure is fixed,shift time may increase by decreased fuel costs.
Fuel efficiency improvement may decrease response of gas priceand increase shift time.
SangUk Nam (University of Arizona) NYC Taxi June 17, 2017 7 / 22
Demand and Supply
Customers also response on the change of gas price.Estimation of gas price elasticity reflects the change demand andsupply.However, the impact on demand will be constant over the vehicleefficiency.I focus on the gap of gas price response between high and lowfuel efficiency vehicle drivers.
The parameter sign of gas price is uncertain.The parameter sign of interaction term gas price and hybridvehicle dummy will be positive.
SangUk Nam (University of Arizona) NYC Taxi June 17, 2017 8 / 22
Data
NYC yellow cab trip level data
Each trip information is automatically collectedby Taxicab Passenger Enhancements Project (TPEP).Fares, drop location, pickup location, and time are included.Until 2013, the vehicle identification number is available.The number of observations is 140 Millions in 2013.
Vehicle information dataTLC provides vehicle information number (VIN) of each medallionfrom 2013.Based on VIN, fuel efficiency can be collected.Vehicle substitution is captured as daily levels.2189 vehicles are substituted in 2013 (14.14%)MPG of each taxi are collected by scrapping VIN information site.Vehicle MPG is varied by model and model years.
Because of available duration of both data set, only 2013 is used.
SangUk Nam (University of Arizona) NYC Taxi June 17, 2017 9 / 22
Gas Price Data
Gas PriceRetail price data is available as weekly data.The EIA provides spot gasoline prices at New York Harbor and LA.Although these prices are not retail, variation will be correlated withretail prices.
Average price: $3.7 (NYC retail) / $2.8 (Spot)
SangUk Nam (University of Arizona) NYC Taxi June 17, 2017 10 / 22
Intuition
Gas prices composes variable costs of taxi.
Increasing fuel efficiency implies decreasing cost for operation.
1-1) The high efficient drivers may search more than others.
2-1) The high efficient drivers may operate more than others.
Gas prices variable parameter will be uncertain because of response of demand.
But the gab between high and low efficient vehicles will be positive.
1-1) The high efficient drivers may relatively increase searching than others withhigh gas prices.
2-1) The high efficient drivers may relatively increase shift time than others withhigh gas prices.
SangUk Nam (University of Arizona) NYC Taxi June 17, 2017 11 / 22
Searching Distance
Theoretical approach
πτ = Prτ (S.Dis|GP)[2.5 + UnitFare ∗ unit(Disτ , timeτ )− Disτ ∗GP/MPG]
− S.Dis ∗GP/MPG (1)
maxS.Dis
Prτ (S.Dis|GP)Rτ − S.Dis ∗GP/MPG
The first of condition is
FOC : Pr ‘(S.Dis|GP)Rτ = GP/MPG
With convex assumption, fuel efficiency improvement stimulatesresponse of gas price.
SangUk Nam (University of Arizona) NYC Taxi June 17, 2017 12 / 22
Searching Distance
Regression Equation
log(S.Disiτ ) = δH + δW + δM + δi + δS + δE + δHC + δHS
+ βlog(GPiτ ) + βHC log(GPiτ )DHC + βHS log(GPiτ )DHS + εiτ (2)
i : Taxi Drivers, τ : Searching TripS.Dis: Searching Distance, GPiτ : Gas Priceδ: Dummy variablesH: Hour, W : Day of Week, M: Month, i : Drivers,S: Dropoff Location, E : Pickup Location,HC: Hybrid Sedan, and HS: Hybrid SUV
SangUk Nam (University of Arizona) NYC Taxi June 17, 2017 13 / 22
Manhattan
Demand for taxi differs bylocation.
Manhattan is divided intocells to reflect locationcharacteristics.2010 census tract is used.(288 cells)
Observed location is detectedby longitude and latitude level.
Based on GPS coordinates,each location is indicated oneach cell.
SangUk Nam (University of Arizona) NYC Taxi June 17, 2017 14 / 22
Instrument Variable
Two problems
Demand and Supply
Gas price can affect on the demand side of taxiHowever, the response gab between high and low efficiency carmay not be biased when customers do not distinguish taxi basedon fuel efficiency.
Coherent Problem
The local events, such as baseball game or weather, could makeendogeneity problem.Using other area gas price as instrument, the coherent problem canbe eliminated.
Los Angeles gasoline price is used as instrument to controlcoherent problem.
SangUk Nam (University of Arizona) NYC Taxi June 17, 2017 15 / 22
Searching Distance
ResultsShift All Trips Day Nightlog(GPiτ ) 0.0310∗∗∗ -.0548∗∗∗ 0.1904∗∗∗
(0.012) (0.017) (0.016)log(GPiτ )*HC 0.0885∗∗∗ 0.0440∗∗∗ 0.1176∗∗∗
(0.013) (0.019) (0.018)log(GPiτ )*HS 0.2558∗∗∗ 0.1506∗∗∗ 0.3086∗∗∗
(0.011) (0.016) (0.015)Hybrid Sedan -.0556∗∗∗ -.0162 -.0833∗∗∗
(0.014) (0.020) (0.019)Hybrid SUV -.2062∗∗∗ -.0945∗∗∗ -.2644∗∗∗
(0.012) (0.017) (0.016)N 139,189,234 51,286,095 87,865,475
SangUk Nam (University of Arizona) NYC Taxi June 17, 2017 16 / 22
Searching Distance
SangUk Nam (University of Arizona) NYC Taxi June 17, 2017 17 / 22
Shift Time
Theoretical approach
U(w , t) = w − u(t)
maxt
E + f (t |GP,MPG)− u(t)
FOC : f ‘(t |GP,MPG) = u‘(t)
The solution function is
t∗ = u‘−1(f ‘(t∗|GP,MPG))
With convex assumption, fuel efficiency improvement stimulatesresponse of gas price.
SangUk Nam (University of Arizona) NYC Taxi June 17, 2017 18 / 22
Shift Time
Regression Equation
log(T .Timeit) = δH + δW + δM + δi + δHC + δHS
+ βlog(GPit) + βHC log(GPit)DHC + βHS log(GPit)DHS + εit (3)
i : Taxi drivers, t : ShiftT .Timeit : Shift Time, GPit : Gas Priceδ: Dummy variablesH: Hour, W : Day of Week, M: Month, i : Drivers,HC: Hybrid Sedan, and HS: Hybrid SUV
SangUk Nam (University of Arizona) NYC Taxi June 17, 2017 19 / 22
Shift Time
ResultsShift All Trips Day Nightlog(GPiτ ) -.1411∗∗∗ -.0842∗∗∗ -.1976∗∗∗
(0.007) (0.009) (0.010)log(GPiτ )*HC 0.0255∗∗∗ 0.0065 0.0236∗∗∗
(0.008) (0.010) (0.011)log(GPiτ )*HS 0.0200∗∗∗ 0.0298∗∗∗ 0.0289∗∗∗
(0.006) (0.008) (0.010)Hybrid Sedan -.0286∗∗∗ -.0009 -.0226∗∗
(0.008) (0.004) (0.011)Hybrid SUV -.0275∗∗∗ -.0362∗∗∗ -.0316∗∗∗
(0.007) (0.009) (0.009)N 5,550,513 2,697,724 2,852,789
SangUk Nam (University of Arizona) NYC Taxi June 17, 2017 20 / 22
Shift Time
SangUk Nam (University of Arizona) NYC Taxi June 17, 2017 21 / 22
Result Summary
I analyzed the different impact of gas price on driving behaviorbetween high and low efficiency vehicle in NYC taxi industry.Two factors are considered: shift time and searching distance.
Both results represent elasticity of gas price is increased by fuelefficiency improvement.In searching distance, the average impact is small.In shift time, the average impact does not exist.
SangUk Nam (University of Arizona) NYC Taxi June 17, 2017 22 / 22