Gothamist
A non-profit newsroom, powered by WNYC.
Gothamist
Listen Live
Misc
The Economics of Splitting a Cab
By
Jacob Dobkin
Published Dec 9, 2005
Modified Mar 7, 2008
Share
FacebookTwitterRedditEmail
Never miss a story
Email address
By submitting your information, you're agreeing to receive communications from New York Public Radio in accordance with our Terms .
By
Jacob Dobkin
Published Dec 9, 2005
Modified Mar 7, 2008
Share
FacebookTwitterRedditEmail
We rely on your support to make local news available to all
Make your contribution now and help Gothamist thrive in 2026. Donate today
Gothamist is funded by sponsors and member donations
Leave it to the Wall Street Journal to spend 2000+ words complexifying a a relatively straightforward question: what's the best way to split up a cab-fare when everyone is going in the same direction? We've faced this problem literally dozens of times, and usually end up with one of two situations: the person who gets off last pays for the entire thing (as an act of generosity, figuring that giving a lift to the other person going in the same direction hasn't actually increased his fare), or the two people split the fare (thus avoiding the embarassment of arguing over who has saved more and why.) Of course, economists love to argue. Here are their methods:
The trip-leg method: "Before consulting with economists, my sense was that all three passengers should evenly split the first leg of the trip to A's house, because each one needed to go that far anyway. Then B and C should split the leg from A's house to B's, and C should pay for the rest."
The proportional-savings method: "every passenger pays an amount proportional to what he would have paid without the savings. Proportional splitting of surplus and debts is a common approach in U.S. law, including bankruptcy cases."
The game-theory method: "the Nash bargaining strategy -- an approach based on game theory in which each cab passenger is seen as a party to the deal and is negotiating his best outcome -- would have the passengers split the savings equally, so that A, B and C each gets $2 knocked off his bill. Why share the savings equally? Think of the shared cab ride as a contract being struck to yield savings: Any party could walk away from the deal and kill it, so each should share equally in the fruits of the deal."
The game-theory method with coalition proviso: "Glenn Ellison, a professor of economics at the Massachusetts Institute of Technology, pointed out that the bargaining model can get more complicated if individuals can form coalitions and bargain jointly. For example, if B and C traveled together, without A, they could still save $5. So they could argue to A that they should get to split $5 of the $6 total savings, and that only $1 is up for the equal split."
The Talmudic method: "To solve the problem, you need to consider all three possible pairs of two riders from the group of three, imagine them haggling over the savings, and come up with an overall solution -- modeled after the Talmud's teaching on the divided estate -- that works for all three negotiations. The math was formalized in a Nobel Prize-winning paper by Robert Aumann and Michael Maschler 20 years ago, and is too involved for our purposes here, but the result is this: If the surplus is less than half the total cost, split the savings equally until one of the riders gets back half his original fare."
Yeah- we know, we didn't understand any of that either! Note to selves: avoid sharing cabs with an economics professors. Or, make sure you take a cab with an econ professor if we do have a strike.
And we wonder what New York City Hack would say. Also, grubby money turns hands dirty, natch.
Tagged
As
bomb
city
fare
law
love
Massachusetts
Massachusetts Institute
Miscellaneous
money
new york
new york city
nobel prize
people
strike
technology
wall street
wall street journal
Jacob Dobkin
Jake Dobkin co-founded Gothamist with Jen Chung. In 2019, Jake released Ask a Native New Yorker, a book based on his Gothamist advice column.
Read more
Gothamist is funded by sponsors and member donations
Gothamist is funded by sponsors and member donations
MORE miscellaneous
We visited 8 laundromats to talk about voting and elections. Here's what people had to say.
As we inch closer to Election Day in November, WNYC is turning some laundromats in the New York metro area into hubs of civic dialogue.
By
Jodi Malarbe
and
George Bodarky
Published Jun 23, 2024
Aging with Pride: LGBTQ+ older adults share their personal journeys
As we mark Pride month, LGBTQ+ older adults share their struggles, triumphs and advice for today’s generations.
By
George Bodarky
Misc
Aging with Pride: LGBTQ+ older adults share their personal journeys
As we mark Pride month, LGBTQ+ older adults share their struggles, triumphs and advice for today’s generations.
By
George Bodarky
Hands in the dirt: Meet some of NYC's community gardeners
By
Enrico Denard
and
George Bodarky
'In the very, very beginning, it was about 3 feet of garbage': How NYC’s first community garden got started
By
George Bodarky
Serving up BBQ ribs and a deep sense of community in the South Bronx since 1954
By
George Bodarky
Never miss a story
Catch up on the most important headlines with a roundup of essential NYC stories, delivered to your inbox daily.
Sign upEmail address
By submitting your information, you're agreeing to receive communications from New York Public Radio in accordance with our Terms .