Are New York City cab drivers bad optimizers?

 

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Do NYC cab drivers quit too early when it rains?

Students of judgment and decision making (aka behavioral economics) are familiar with the idea that cab drivers work until they hit an income target and then quit, ignoring opportunities to make more money on especially profitable days, such as when it rains. They probably get the idea from hearing people talk about the paper Labor Supply of New York City Cabdrivers: One Day at a Time. We say “hearing people talk about the paper” because that paper does not say that cab drivers make more money when it rains and is otherwise quite cautious (e.g., it concludes “because evidence of negative labor supply responses to transitory wage changes is so much at odds with conventional economic wisdom, these results should be treated with caution.”) ….[READ]

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