What drives taxi drivers?

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We find that passengers with inferior information about optimal routes are taken on detours of almost double length, while lack of information on the local tariff system increases the likelihood of manipulated bills by about fifteen percentage-points. Passengers’ income seems to have no effect on fraud.

From a new published paper by Balafoutas et al (The Review of Economic Studies, December, 2012). 

The authors explain:

 By letting a triple of passengers – each in a different role – ask for the same service at practically the same time we were able to control for a variety of unforeseeable factors, such as traffic jams. Given the data on the exact length of a route and the information on the local taxi tariff system, we have then been able to identify the amount of overcharging by charging more than justified by the chosen route.

And:

Overall, we have found that 46% of passengers were taken on detours that accounted for at least 5% of the shortest possible route. The overall average detour was 10%, or roughly 1.3 km of the average total length of 12.7 km. Overcharging through manipulating fares was observed in only 11% of possible cases. Recall that overcharging – once detected – is typically much easier to verify than overtreatment, because there are always possible excuses for taking a detour. Thus, the expected material costs of being detected (e.g., the risk of being fined or losing one’s license) are probably higher for a taxi driver in the overcharging than in the overtreatment dimension, making the latter more attractive.

We knew that all along, but it is interesting to see some numbers. 

The researchers use GPS technology.

My favorites are some taxi drivers in Ghana, who usually say they know the location of your destination, but after a long time they start asking pedestrians for directions. They are awesome!