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If Dante Alighieri wrote his seminal divine comedy today, driving for Uber would almost certainly feature as one of the nine rings. As of 2019, Uber has roughly 110 million users worldwide. Sixty-nine percent market share in the US for ride-sharing and a 25% market share for food delivery. Knowing a few drivers that operate out of New York City leads me to believe that the occupation isn’t for the faint of heart.
Employee reviews are conducted by the customers (the majority of which are intoxicated), 74% of drivers make considerably less than minimum wage and according to a new eye-opening report co-authored by John List, a decorated economist from The University of Chicago. While the average rider only tips on 16% of their transactions, 60% of rideshare customers never tip, and only 1% of these always tip.
“Our field experiment generates data from more than 40 million trips, allowing an exploration of social preferences in the ride-sharing market using big data,” the authors wrote in the report. “Combining experimental and natural variation in the data, we are able to establish tipping facts as well as provide insights into the underlying motives for tipping.”
Taken for a ride
Considering Uber tipping is done completely anonymously and after the service is complete, the fact that more than 15% of trips receive them is a marvel.
These numbers could be much better. Some factors that dictate who tips the most and how much made more sense than others. For instance, users with five-star ratings tipped twice as often as users with 4.75 ratings or lower, while tipping 14% more money. When drivers got matched up with the same customer twice, the rider typically tipped 27% more on the second trip compared to the first.
Men tended to tip on more trips than women (17% vs. 14.3%), though female drivers were tipped 10-12% more by both genders unless they were old. Female drivers above the age of 65 received no discernible tipping advantage compared to men of any age. For whatever reason, tips appeared to be highest between the hours of 3 and 5 a.m., and are also generally high on Fridays and Saturdays around 6 p.m. Of those that consistently tipped, the average amount was $3.11 or about 26% of their fare.
“Field experiments provide an empirical look at consumer behavior that wouldn’t be possible otherwise,” said List, who is the Kenneth C. Griffin Distinguished Service Professor of Economics at University of Chicago, who co-authored the study alongside Bharat Chandar, Uri Gneezy, and Ian Muir.
“In this case, we found clear differences in tipping behavior informed by environmental and demographic factors, such as gender, age, and race.”