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That's essentially the argument NC has presented for why Uber is not sustainable.
In that case they make very bad arguments, because such an equilibrium would be expected to be quite stable (although Uber might not be part of it).
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Do you feel I've unfairly presented someone's position? I don't agree with it but I think I have presented their case reasonably. Unless your objection was to my claim that they are "ardent defenders of the free market," but I think that is a reasonable characterization of the Adam Smith tie types.
You've misrepresented the conflict as being one-sided, when it's not. There's a real difference of opinion and analysis, and plenty of "ardency" on both sides.
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You've misrepresented the conflict as being one-sided, when it's not. There's a real difference of opinion and analysis, and plenty of "ardency" on both sides.
On one side you have people who believe that predatory pricing is an issue and likely also that government regulation is needed to prevent it. On another you have people who believe that markets are so efficient that predatory pricing cannot happen. What do you think I'm missing here? Can you be any more specific than just vaguely saying I'm missing some nuance?
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In that case they make very bad arguments, because such an equilibrium would be expected to be quite stable (although Uber might not be part of it).
If Uber "is not part of the equilibrium" then that would suggest it wasn't sustainable.
In the claim in the article that they're inflating top line revenue growth, is the argument that they're selling a $100 ride but giving a $20 discount and calling it $100 in top line revenue?
According to the article they are not only doing what you describe, but if due to an error or customer service reason they refund the ride later that day, they still count it as $100 of revenue.
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The prices are verifiably not too low to pay the drivers because they do pay the drivers at the prices they're using. If the drivers are being paid below market rate and still driving for them, then they are the ones subsidizing.
I don't think you understand. Uber loses money on every ride. The only reason they can set such low prices is they're burning through investors' money.
But that's basically every business focused on growth.
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Sounds like a terrible idea given that this would just open the door for another company to do the same to them. They don't produce anything novel which can't easily be replicated.
Once they acquire a dominant position, the cost to assail it will be astronomical. It already is in fact, which is why Lyft is burning so much cash just in the US market alone ($3 to $4 billion in red ink just in the US). You're going to have to convince venture capitalists to put in $10 or $15 billion and be willing to watch it all burn, on the nearly impossible task of unseating the market winner. That will never h…
There's no lock-in here. "Oh, some other service cropped up in my area and the rides are 50% that of Uber's? Ok, I'll download a new app"
I don't think any of this nonsense is sustainable.
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If Uber "is not part of the equilibrium" then that would suggest it wasn't sustainable.
So they would have preferred it, possibly come to a different conclusion, if Uber would have been likely to be established as a perpetual monopoly?
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On one side you have people who believe that predatory pricing is an issue and likely also that government regulation is needed to prevent it. On another you have people who believe that markets are so efficient that predatory pricing cannot happen. What do you think I'm missing here? Can you be any more specific than just vaguely saying I'm missing some nuance?
You only said half of that. That was what you were missing.
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I don't think you understand. Uber loses money on every ride. The only reason they can set such low prices is they're burning through investors' money.
No--the only reason they can pursue growth into new geographic areas and pursue new business models (like Uber eats) is because they're burning through investors' money. That in no way implies that their rides would not profitable if they were not spending so much on growth. But that's basically every business focused on growth.
https://www.vox.com/new-money/2017/1/9/14194202/uber-lost-22...
> In an epic five-part series of blog posts, transportation industry analyst Hubert Horan lays out the case for skepticism about Uber’s hype. In his view, Uber just doesn’t have a cost advantage over its competitors the way Amazon did. Amazon saved money by getting rid of expensive retail stores and sales clerks. In contrast, an Uber ride still requires a car, a driver, and some fuel just like a conventional taxi ride. So there isn’t much room for Uber to undercut its competitors.
> “This industry has a simple cost structure,” Horan told me in January. “Labor is about 58 percent, fuel is 9 percent, and so forth.”
> Of course, this flies in the face of many customers’ experiences. It sure seems like Uber has figured out how to provide a cleaner, faster ride at a lower fare. But Horan argues that this is entirely a reflection of the subsidies provided by Uber’s investors. Uber rides aren’t actually cheaper to provide than conventional taxi rides, Horan believes, it just seems like it because Uber is taking a loss on every ride.
> An obvious objection here is that Uber’s investors are not idiots. They know perfectly well that “lose money on every ride and make it up on volume” isn’t a viable business model. And when they made their investments, they presumably had access to internal financial data that isn’t available to the rest of us. It seems very unlikely that Uber could convince investors to give it $11 billion to continue pursuing a business model whose numbers didn’t add up.
> Horan told me Uber is accepting big losses now in an effort to drive conventional taxi companies and rivals like Lyft out of business. “Their growth is predatory,” Horan argued. “They are trying to displace more efficient producers.”
The article I linked also offers an argument against this logic, but I'm not persuaded by it.