EVALUATING THE COMPETITION EFFECTS OF UBER’S ENTRY INTO THE BRAZILIAN INCUMBENT CAB-HAILING APP SEGMENT

Abstract

Abstract This paper assesses the competition effects of Uber’s entry into the incumbent cab-hailing app segment in Brazil. Using a monthly panel data set (from 2014 to 2016) covering the Brazilian municipalities and a difference-in-differences estimator, we show that Uber’s entry into the market resulted in an average reduction of 56.8 percent in the number of rides from cab-hailing apps in the cities where the platform operates. The magnitude of this effect suggests that Uber has had a clearly disruptive effect on the incumbent sector. We also found significant spatial heterogeneity in the competition effects of the platform when comparing the markets of the capitals of the North and Northeast regions (where Uber entered late) with the capitals of the South, Southeast, and Central West regions (where Uber entered early). Only in the second group of municipalities, we found that Uber’s entry caused a reduction in taxi fares (reduction of 12.1 percent). This indicates that the cab-hailing app sector reacted to Uber’s entry by offering discounts in fares after a longer period of exposure to a competitive environment.