As the saying goes, time is money—a fact clearly reflected in the transportation sector, where travelers often pay a premium for direct flights, express trains, and other time-saving options.

Figure 1. How Consumers Value Their Time.

Yet quantifying how much people truly value their time remains a challenge. Now, a new paper co-authored by an MIT economist leverages ride-sharing data to explore the broader effects of personalized pricing. Figure 1 shows How Consumers Value Their Time.

Focusing on a European ride-sharing platform that operates via an auction system, the researchers discovered that users are more sensitive to price than to wait time. They also found that consumers are willing to pay more to save time during work hours—and that this willingness to avoid waiting can significantly boost business revenue. Notably, some consumer segments are far more inclined than others to pay higher prices for faster service.

When riders are allowed to bid for faster pickups, the average price rises 5.2% above the platform’s minimum, while the gap between what users pay and their maximum willingness to pay narrows by 2.5%. In economic terms, this boosts “surplus” value for firms while reducing consumer surplus.

“One of the important quantities in transportation is the value of time,” says MIT economist Tobias Salz, co-author of a new study that quantifies this dynamic through people’s ride choices.

The paper, Personalized Pricing and the Value of Time: Evidence from Auctioned Cab Rides, will appear in Econometrica. The authors include Nicholas Buchholz and Jakub Kastl of Princeton, Laura Doval of Columbia Business School, Filip Matejka of Charles University in Prague, and Salz, who holds the Castle Krob Career Development Professorship at MIT.

While it’s difficult to isolate how much people will pay solely to save time, transportation offers one of the clearest lenses for doing so. Though similar behaviors appear elsewhere—like buying express passes at amusement parks—those scenarios often involve added complexities. Importantly, valuing time isn’t the same as paying for hourly services like tutoring or tax prep.

In this study, the researchers used data from Liftago, a unique ride-sharing platform in Prague that allows drivers to bid on passengers’ business. The platform factors in wait times, with drivers also specifying when they will be available. By analyzing how passengers choose rides based on price and wait time, the researchers could directly measure how much people are willing to pay to avoid waiting. The study analyzed 1.9 million ride requests and 5.2 million bids.

“It’s like an eBay for taxis,” says MIT economist Tobias Salz. “Instead of assigning a driver to you, drivers bid for your business. This direct comparison allows us to clearly observe how people value time through their choices and the prices they’re willing to pay.”

The dataset offered insights not only into personalized pricing but also its impact on the transportation market. The researchers found that price elasticity—how much prices change in response to demand—was four to 10 times greater than the elasticity of wait times, meaning consumers are more responsive to changes in price than to longer wait times.

In this context, the researchers determined the value of time to be $13.21 per hour for users, though this is specific to this particular setting. The study also found that bids increase during work hours and that consumers vary significantly in their willingness to pay. The top quartile of bidders valued time 3.5 times higher than the bottom quartile.

While the personalized pricing system increases the overall business surplus, it reduces the consumer surplus. The higher-paying top quartile consumers bear most of the costs of this system. “Most consumers still benefit,” Salz says, “but those who are hurt have a very high willingness to pay. The firm captures much of the surplus, while drivers—despite not having access to the data—also benefit.”

This study challenges conventional economic theories, especially regarding how consumers benefit from personalized pricing. “It wasn’t clear a priori whether consumers would benefit,” Salz notes. “The data showed us the answer.”

While the research primarily interests those in transportation and ride-sharing, it also contributes to broader economics on information in markets—how knowing or not knowing a consumer’s preferences can shape market outcomes.

“I’m broadly interested in these information frictions,” Salz adds, “and how they influence consumer behavior and market dynamics.”

Source: MIT NEWS

Cite this article:

Priyadharshini S (2025), Here’s One Way Consumers Put a Price on Their Time, AnaTechMaz, pp. 86