  This paper studies the effects of economies of density in transportation
markets, focusing on ridesharing. Our theoretical model predicts that (i)
economies of density skew the supply of drivers away from less dense regions,
(ii) the skew will be more pronounced for smaller platforms, and (iii)
rideshare platforms do not find this skew efficient and thus use prices and
wages to mitigate (but not eliminate) it. We then develop a general empirical
strategy with simple implementation and limited data requirements to test for
spatial skew of supply from demand. Applying our method to ride-level,
multi-platform data from New York City (NYC), we indeed find evidence for a
skew of supply toward busier areas, especially for smaller platforms. We
discuss the implications of our analysis for business strategy (e.g., spatial
pricing) and public policy (e.g., consequences of breaking up or downsizing a
rideshare platform)
