The research paper, by Jeffrey Fossett, Michael Luca and Yejia Xu, entitled “LEAVING MONEY ON THE DASHBOARD: PRICE DISPERSION AND SEARCH FRICTIONS ON UBER AND LYFT” suggest that consumers compare prices substantially less often than expected.

Whilst comparison shopping for hotels, flights and other services is considered mainstream, thus helping to keep pricing competitive, the paper highlights that only 16% of consumers open both Uber and Lyft when comparing prices. Thus suggesting the majority of users will accept and pay the price quoted by one company without comparing with another.

And by not comparing ride prices between apps, consumers are potentially increasing the prices they pay for rides. The paper suggests this could increase gross bookings by $300 million per year, just for New York City.

The findings shed light on the extent of consumer search and the relevance of behavioral frictions, and provide a starting point for understanding competition in ridesharing markets. They also raise questions of policy relevance: because these frictions lead to too little search, they harm consumer welfare and limit competition.

The paper extract concludes:

“We document price differences for identical trips on Uber and Lyft, based on an audit of the two platforms. While price dispersion exists in the market, device-level data show that only 16.1 percent of consumers opening one app also open the other. Our estimates suggest that the modest frictions involved in comparison shopping increase platforms’ gross booking volume by over $300 million annually in New York City alone. While price-comparison engines could in principle reduce frictions, Uber’s API terms of use limit such services, reducing riders’ ability to price compare.”

The full research report can be read here.