Private hire vehicles have grown to become an alternative mode of transport that is affordable and convenient. Service providers such as Grab and Uber are constantly coming up with newer and cheaper services so as to increase their market share. An example of such is Grab Hitch, where drivers pick up riders who are going to the same destination. Unlike conventional cab services, Hitch drivers are part time drivers who offer to share a ride with paying riders. This helps drivers earn some dollars to cover some of their driving expenses. While end consumers like myself pleasurably engage these services, what are the hidden economic costs that we are actually being forced to pay?
On a busy morning, a hitch from my home in the North-eastern part of Singapore to NUS would take 30 minutes if the driver gets on the expressway (left image). On the other hand, the toll-free route (right image) takes about 40 minutes to reach the same destination. Logically, one would take the expressway route since it gets to the destination faster. That wasn’t the case for most of my hitches. In fact, I noticed that the drivers always took the 40-minute route. But that wasn’t without explanation.
Why Drivers Prefer the Toll-free Route?
Grab Hitch drivers, like any other producers, want to maximise profit while minimising costs. Traveling on the expressway during the peak hours can cost up to $7 of ERP charges (road tolls). Considering that Hitch drivers receive around $12-14 for a trip to NUS, $7 of road tolls is more than half of what they are being paid.
Also, taking the expressway would mean they travel longer distances (24 km) as compared to the toll free route (22 km). The extra 2 km traveled can accumulate to higher amounts of petrol consumed at the end of the month. This extra cost can be, of course, minimised if the driver took the toll free route.
However, it is not necessarily true that every driver prefer the toll-free route. While minimising financial costs is of utmost importance in decision making, our brain subconsciously measures economic costs. A driver who is in a rush may not mind paying extra if it enables him to reach his destination on time. On the other hand, a driver who has all the time in the world may prefer the toll-free road even though it requires more traveling time. Such economic costs cannot be measured in monetary terms and cannot be reflected in our accounting books. Nonetheless, they have some impact on our daily decisions.
What Hidden Costs are we Paying?
Hitch riders are very similar to the drivers, except riders seek to maximise their welfare (instead of profits) while minimising the price paid (costs). But given the analysis previously, drivers will most likely prefer the cost minimising route while riders prefer the time-cost minimising route. Would you not like an extra 15 minutes of sleep time if you could?
The same trip from home to NUS, costs approximately $18 with full time Grab drivers, excluding the additional road tolls that are charged to consumers. The difference of $10 (trip fare + road tolls) thus becomes the amount of money that consumers are paying if they value their time more.
Before you come to the conclusion that we are saving merely 10 minutes of our time by paying $10, think again. Expressways usually have four lanes, and a speed limit of 80 to 90 km/h (though sometimes you can see cars going faster than that). Major expressways are connected, which means cars do not have to exit the expressway to merge onto another expressway. A trip from home to NUS on expressways can go up to 35 minutes unless there are major accidents. This is very rare because most accident-created jams clear up pretty quickly.
Unlike expressways, toll-free routes are usually long and winding, with traffic lights once every few metres. The speed limit is usually capped at 60km/h and most of the time, cars cannot accelerate that much before having to stop again at the next traffic light. Zebra crossings also contribute in slowing down cars. Last but not least, cars are prohibited from using bus lanes during the peak hours. All these factors increase the time needed to travel from one point to another. The time spent on taking the toll-free route can go up to 45 to 60 minutes if traffic is bad (or if you get stuck at every traffic light because you have bad luck).
Comparing the travel time of both routes, we spend almost up to double of that time on the car if we take the toll-free route. Now are we paying $10 for a mere 10 minutes, or for 30 minutes of our time?