CAMBRIDGE, Mass.— As the old saying goes, time is money. But just how much is time worth to consumers? A new study co-authored by an MIT economist offers a rare and precise look at that question, using data from a European ride-sharing platform where passengers bid for rides.
The research reveals that, in this unique market setup, consumers are more sensitive to price than wait time—but are willing to pay more to save time during working hours, boosting business revenues in the process. The study highlights how personalized pricing in transportation can shape consumer behavior and market outcomes.
“One of the important quantities in transportation is the value of time,” says MIT economist Tobias Salz, co-author of the study. “We came across a setting that offered a very clean way of examining this quantity, where the value of time is revealed by people’s transportation choices.”
Published in Econometrica, the paper—“Personalized Pricing and the Value of Time: Evidence from Auctioned Cab Rides”—is co-authored by Nicholas Buchholz (Princeton), Laura Doval (Columbia Business School), Jakub Kastl (Princeton), Filip Matejka (Charles University, Prague), and Salz.
A Natural Experiment in Time and Money
The study analyzes 1.9 million ride requests and 5.2 million bids on Liftago, a Prague-based ride-sharing app that allows drivers to bid for customers. This auction-based model lets consumers weigh wait times and prices side by side, revealing exactly how much they are willing to pay to avoid delays.
“It’s like an eBay for taxis,” Salz explains. “Drivers compete for passengers, and passengers get to choose among different offers that vary by price and wait time. It gives us a very clean window into how people make trade-offs between time and money.”
The researchers found that consumers’ price sensitivity is four to ten times greater than their sensitivity to wait times. Still, time clearly matters—particularly during the workday. On average, the value of time was estimated at $13.21 per hour, though that figure varies significantly across users.
Personalized Pricing: Who Gains?
The data show that when riders can bid for earlier pickup times, the platform’s revenue increases by 5.2 percent, while the gap between what people are charged and what they are willing to pay shrinks by 2.5 percent. Economists call this a gain in producer surplus and a decline in consumer surplus—meaning businesses capture more value.
Yet the picture is nuanced. While the overall surplus in the market increases, that gain is not evenly distributed. Consumers with a higher willingness to pay—typically in the top quartile—bear most of the cost. This group values time 3.5 times more than those in the bottom quartile and tends to pay significantly more to avoid longer waits.
“The majority of consumers still benefit,” Salz says. “The ones who lose out are those willing to pay the most. The firm uses personalized data to extract more surplus, but most riders are brought into the market who otherwise wouldn’t participate.”
Interestingly, drivers also benefit from the auction system, despite not having access to the consumer data that powers it.
Broader Economic Insights
The findings add to a growing body of research on how information—or its asymmetry—shapes markets. Transportation is a rare sector where time’s value can be isolated, but the principles apply more broadly, from amusement parks to online marketplaces.
“It was not clear a priori whether consumers would benefit from this setup,” Salz notes. “You can’t know the answer to that without going to the data.”
This study underscores how technology platforms can use data to fine-tune pricing and service delivery—but also raises important questions about equity, transparency, and the limits of personalized pricing.
The research was supported by the National Bureau of Economic Research, the U.S. Department of Transportation, and the National Science Foundation.
