Transaction Costs on Online Transportation Partnership: An Empirical Study in Malang, Indonesia

Abstract

This study uses a digital platform with a partnership pattern between application companies and online transportation drivers. Previous studies reported that digital platforms were able to reduce transaction costs. This study aims to identify transaction costs in online transportation partnerships in Malang, Indonesia. Using a qualitative approach with interactive analysis, the informant is a two-wheeled online transportation driver in Malang City. This study revealed that several transaction costs in online transportation namely negotiated transaction costs when the driver is suspended and supervision transaction cost when the driver got problems with an error application server, lost internet network, parking fees for pick-up, and fake orders from customers. Further, transaction costs are also uncertain since the company’s application regulations frequently change overtime. Despite the transaction fees, the drivers’ overall income were much better compared to their previous job. To reduce these transaction costs, government regulations are needed to balance the rights of drivers. Moreover, the company could replace the suspension with a fine of a certain amount. Changes to rules and policies must accommodate input from driver partners since they are more aware of actual conditions.