Do token incentives work? An empirical study in a ride-hailing platform

Abstract

With the spread of the blockchain economy, incentives enabled by crypto tokens will compensate for more desirable activities that have been unpaid or underpaid in the past. Given the fact that crypto tokens are theoretically known as an inexpensive means of incentivization, this study provides some of the first empirical evidence to validate the practical effectiveness of token incentives. We use internal data from a ride-hailing company which recently initiated a unique token incentive program to compensate their drivers for prosocial performance. Using a difference-in-differences method to exploit the natural experiment, we find that token-incentivized drivers significantly increase the number of finished trips but maintain the number of cancellations at the same time. Through a subgroup analysis, we also find that tokens have greater incentive effects among early platform participants, while no difference between token-incentivized and non-incentivized drivers among late participants turns out. Our results establish that token incentives can certainly induce loyal participants to improve their behaviors and resolve stubborn problems in a traditional platform.