People prefer to pay money to save time: study
Time is money. This saying has never sounded so true as it does today, in a world where every minute seems to count.
An international study published in the journal Econometrica provides quantified evidence of this.
It reveals that, on VTC platforms (Spain's Vehiculo de Transporte con Conductor, or private hire vehicle), users are ready to put their hand in the pocket to gain a few moments.
Researchers from several universities, including the Massachusetts Institute of Technology (MIT), have studied Liftago, a Czech ride-sharing platform with an original approach.
On this application, drivers are not assigned automatically, but submit offers that passengers can compare. From wait times to fares to availability, everything is part of the negotiation on Liftago.
'It's like an eBay for taxis,' says MIT economist and study coauthor, Tobias Salz, quoted in a news release.
When faced with wait times, Liftago's users are prepared to pay more. — Freepik
By analysing nearly two million ride requests and over five million bids, the researchers found that time has become a precious resource that can effectively be bought and sold.
Indeed, faced with wait times, users are prepared to pay more. On average, they value their time at US$13.21 (RM56.40) per hour.
This figure rises significantly during working hours, when every minute 'taken' from their schedule is worth its weight in gold.
This behaviour has tangible effects. By saving time, users contribute – often without realising it – to increasing Liftago's revenues.
In fact, offers for fast journeys result in an average increase of 5.2% over the minimum price.
This mechanism increases the company's gains, but reduces those of consumers. In other words, the better these kinds of VTC platforms understand their customers' habits, the better they know how far they can raise prices without driving users away.
Creating inequalities
This race against time also creates inequalities. Not all customers are on an equal footing when it comes to the cost of the service.
The study shows that the top 25% of bids put a value on time that is three and a half times greater than the lowest 25%.
As a result, some consumers can afford faster journeys, while others have to put up with longer delays.
Although based on an uneven logic, this system continues to appeal.
'The majority of consumers still benefit,' says Tobias Salz. 'But the flip side is that the firm, by knowing every consumer's choke point, can extract the surplus. Welfare goes up, the ride-sharing platform captures most of that, and drivers – interestingly – also benefit from the system, although they do not have access to the data.'
More broadly, this study questions our relationship with time in an economy where data is valuable.
What happens when companies know everything about our habits?
What impact does this have on prices, our well-being and fairness? In a world where every second can be bought, time is becoming a new social marker, separating those who can afford to pay more to save time from those who just have to wait. – AFP Relaxnews
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