Prior outcomes and subsequent risk-taking: evidence from New York City taxi rides

Purpose The purpose of this study is to examine how prior outcomes affect individuals’ subsequent risk-taking behaviors, and specifically how such prior outcomes can engender dishonest or fraudulent behavior. Design/methodology/approach Leveraging the New York City (NYC) Taxi and Limousine Commission’s taxi ride trips from 2013, the authors combine a logistic regression model and data analysis to examine how prior outcomes can increase an individual’s propensity to take on risk, including engaging in fraudulent or dishonest behavior. Specifically, using data on NYC cab drivers, the authors investigate how the amount of fare received on a trip to New Jersey (NJ) impacts cab drivers’ behavior subsequently, given that they are prohibited from picking up passengers in NJ. Findings The authors find that drivers are more likely to illegally pick up a passenger from NJ if their drop-off trip had resulted in a low fare. Based on the data sample, the cab driver at the 25th percentile of total fare on the trip to NJ is approximately 3.7 times more likely to illegally pick up a passenger in NJ compared to the driver at the 75th percentile. Originality/value This study contributes to the literature on sequential choice that investigates how prior outcomes influence individuals’ subsequent decisions. Using the different setting of NYC taxi drivers, this study adds to the empirical research on sequential choice in marketing, particularly how prior outcomes can increase an individual’s propensity to take on risk, including engaging in fraudulent or dishonest behavior. Finally, it contributes to the literature investigating how individuals rationalize fraud by showing that poor prior outcomes are another factor driving fraudulent behavior.