The Impact of the Mobile Application on Off-Line Market: Case in Call Taxi and Kakao Taxi

Mobile application is growing explosively with the advent of a new technology: smartphones. Mobile application is a new marketing channel and performs as a start-up platform. This study examines the effect of mobile application on the off-line market. Despite the continuous declining demand for taxi service, paradoxically, the supply of taxi service has increased. The taxi industry can be categorized into general taxi and call taxi. General taxi is accidental and inefficient because it has to search for its own passenger. As call taxi takes the request of a passenger, it is more efficient than general taxi. However, the current defective passenger–taxi driver matching system and insufficient taxi driver management hinder the development of the call taxi market. Differences in differences (DID) is an econometrical methodology that examines whether or not an event has meaningful influence. This research uses DID to investigate the effect of the Kakao taxi application on the call taxi industry. Furthermore, it examines the effect of major companies’ reckless diversification, which is considered unethical behavior. The passengers of call taxi data from August 2014 to July 2015 and those of designated driving service data of the same period were collected as the control group.