the impact of gasoline prices on driving behaviors of nyc .... iaee... · the impact of gasoline...

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?


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%


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)


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


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.


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.


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.


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.


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)


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.


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.


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


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.


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.


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


Searching Distance


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.


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


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


Shift Time


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.


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