For those of you who do not know what Uber is, it is a ride sharing program that uses smart phone technologies to allow a customer to easily be connected with a driver, who will then pick up the customer and drive them to the desired location. The customer is able to track where the driver is and how far away he may be. Currently, Uber is in over 45 different countries in over 100 cities and is valued at $15 billion. Uber has absolutely revolutionized the "taxi" industry. Uber is safer, easier, smarter, and often cheaper. It is a game changer. As great as it is, there is a negative that deters potential customers: "surge pricing". Surge pricing occurs during heavy traffic times when many of the Uber drivers are busy. It changes the price to multiple times the normal fare depending on how busy it is. Simple microeconomic theory would suggest that these surges would hurt Uber and drive customers away. Despite that, what Uber is creating overall should be treated as a positive as it creates an even more dynamic, free marketplace that is determined by supply and demand.
In many cities across the country, the cab industry is far from ideal. It is marked by monopoly, driving license, car license, regulation, and many more factors that create an absurd, unfair barrier to entry. Uber uplifts the whole industry. It allows anyone who passes their simple test to join. In fact, I would wager that anyone with a driver's license in our class would be able to apply and drive for Uber. The marketplace that Uber creates is essentially being the middleman between a customer (the demand) and a willing driver (the supply). So as more demand occurs, the higher the surge price may become, but ultimately this will attract more drivers who want to cash in on the surge pricing, thus effectively bringing back down price as the supply increases. This creates a fluid, functional market place that allows customers to participate in a higher quality good that functions as a normal, quality marketplace. Additionally, if the surge occurs lets say on a Friday night at 2 am, and Uber drivers aren't willing to be up that late, taxi drivers will react and be more likely to provide the service, thus fitting into the supply and demand model.
I believe that Uber is an incredible service that provides a superior market for the taxi industry. Not only does it uplift the traditional market but it increases overall economic efficiency.
http://www.forbes.com/sites/ellenhuet/2014/10/14/ubers-f-rating-at-better-business-bureau-isnt-for-surge-pricing-just-for-unresponsiveness/
http://www.economist.com/news/finance-and-economics/21599766-microeconomics-ubers-attempt-revolutionise-taxi-markets-pricing-surge
In many cities across the country, the cab industry is far from ideal. It is marked by monopoly, driving license, car license, regulation, and many more factors that create an absurd, unfair barrier to entry. Uber uplifts the whole industry. It allows anyone who passes their simple test to join. In fact, I would wager that anyone with a driver's license in our class would be able to apply and drive for Uber. The marketplace that Uber creates is essentially being the middleman between a customer (the demand) and a willing driver (the supply). So as more demand occurs, the higher the surge price may become, but ultimately this will attract more drivers who want to cash in on the surge pricing, thus effectively bringing back down price as the supply increases. This creates a fluid, functional market place that allows customers to participate in a higher quality good that functions as a normal, quality marketplace. Additionally, if the surge occurs lets say on a Friday night at 2 am, and Uber drivers aren't willing to be up that late, taxi drivers will react and be more likely to provide the service, thus fitting into the supply and demand model.
I believe that Uber is an incredible service that provides a superior market for the taxi industry. Not only does it uplift the traditional market but it increases overall economic efficiency.
http://www.forbes.com/sites/ellenhuet/2014/10/14/ubers-f-rating-at-better-business-bureau-isnt-for-surge-pricing-just-for-unresponsiveness/
http://www.economist.com/news/finance-and-economics/21599766-microeconomics-ubers-attempt-revolutionise-taxi-markets-pricing-surge
No comments:
Post a Comment