STRUCTURAL ESTIMATION OF ALGORITHMIC PRICE COLLUSION IN LAHORE’S RIDE-HAILING MARKETS

Abstract

This article explores Structural Estimation of Algorithmic price collision in Lahore. It is a survey of whether there is an algorithmic price collusion in the ride-hailing markets of Lahore, with a specific interest in whether the players in the markets use pricing algorithms to coordinate prices, and thus expose themselves to the risks of anti-competitive behaviour. The research problem is evoked by the increased reliance on algorithms in pricing mechanism in dealings in digital markets, with special interest on the ride hailing systems particularly in Lahore as a highly-developed region in Pakistan. Possibility of algorithmic collusion in other markets has been recorded in previous studies, but there is still limited empirical data on the existence of such behavior in the emerging markets. This paper aims at characterizing the behavior of algorithmic price action, and evaluating the probable existence and potential benefit of collusion and the estimated effect of it on economics. There was a mixed-methods design and in combination, there were qualitative interviews of industry professionals and quantitative data based on market observations. The findings demonstrate that the price-setting patterns and algorithmic alterations are substantially correlated and this fact provides evidence on the existence of collusion mechanism. The results add to the knowledge of the digital market behavior and its regulation. The finals section of the study highlights the fact that there should be greater oversight over the usage of algorithms in the context of pricing within the ride-hailing business in Lahore to curb the anti-competitive behaviors.