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In ride-hailing craze, discounts great deal for passengers

Singapore ride-hailing giant Grab generated last year a total of Rp 43 trillion (US$3.07 billion) in consumer surplus for its passengers in Greater Jakarta alone, according to a recent study by research firm Tenggara Strategics and think tank Center for Strategic and International Studies.

Norman Harsono (The Jakarta Post)
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Jakarta
Tue, July 23, 2019

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In ride-hailing craze, discounts great deal for passengers A GrabBike driver picks up a passenger. Singapore ride-hailing giant Grab generated last year a total of Rp 43 trillion (US$3.07 billion) in consumer surplus for its passengers in Greater Jakarta alone, according to a recent study by research firm Tenggara Strategics and think tank Center for Strategic and International Studies.

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ide-hailing services are favored by people because they help them save money, but the price discounts are raising concerns over the business sustainability of the operators, a forum discussion revealed on Tuesday.

Singapore ride-hailing giant Grab generated last year Rp 43 trillion (US$3.07 billion) in consumer surplus for its passengers in Greater Jakarta alone, according to a recent study by research firm Tenggara Strategics and think tank Center for Strategic and International Studies (CSIS).

Grab’s total surplus, which is how much less consumers pay for services compared to how much they are willing to pay, combines the surpluses of its two-wheeled GrabBike service (Rp 5.73 trillion) and its four-wheeled GrabCar service (Rp 40.41 trillion).

“Imagine taking a taxi to the airport. We are ready to pay Rp 200,000. But by using Grab we can get a ride for Rp 150,000. We can save Rp 50,000. The 50,000 is the consumer surplus,” explained CSIS economist Yose Rizal Damuri at the study’s launch on Tuesday in Jakarta.

“What does [the findings of the study] mean?” said Yose at the discussion. “It means that when prices are high, consumers tend not to make transactions. The implication is that discounts are still important.”

The figure was generated by aggregating data from more than 850 million ride-hailing orders in the metropolis as captured by Grab’s database in late May and early August, according to Tenggara Strategics.

The way the consumer surplus was calculated was by extrapolating the fares offered with the orders and whether or not users accepted the fares, said Tenggara researcher Stella Kusumawardhani. Rejection presumably meant the fares were too high.

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