Research / BFI Working PaperNov 30, 2020

On the Effects of the Availability of Means of Payments: The Case of Uber

Fernando Alvarez, David Argente

We use three quasi-natural experiments in Mexico and one in Panama to estimate the effects of having the option to pay with cash on Uber rides. The ability to pay in cash affects the demand for rides, which is reflected in large changes in the total number of trips, fares, miles, and number of users after Uber introduced cash payments, particularly in lower-income city blocks. On the other hand, the effects on prices, estimated times of arrival, and competitor pricing are negligible, consistent with the supply of trips being very elastic. Although cash payments naturally increase the fraction of users that pay exclusively with cash, more than half of the users have access to both cards and cash, and alternate between payment methods. We find evidence consistent with cash and card payments being imperfectly substitutable at both the intensive and extensive margins, which magnifies the impact of policies that restrict the availability of payment methods.

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