Let's not forget that the ride is a commodity. So wealthy people -- who may use ride services more frequently -- move to Lyft. That is, unless, drivers turn of the service outside of rich areas and Uber can ensure better supply.
Uber's "Route-Based Pricing" Predicts How Much You're Willing to Pay
41–50 of 60 posts
Re: Uber's "Route-Based Pricing" Predicts How Much You're Willing to Pay
#42Its funny. When I first started using Uber, every time I took a ride and paid the fair its was almost a joyous experience to pay what seemed like so little. It made me want to use Uber for all sorts of trips and tell everyone else to do the same. Now every time I open it, it feels like just a liiittle too much to use for anything but a very occasional trip. They get more from me for each trip I now almost never take.…
To me the variability is too much. I can't tell at 1pm whether I a 3:30pm trip to my doctor office will cost me $8 or will there be rain and will it cost me $30. Since it's not reliable I prefer it much less. I'd rather it just cost $16 both times.
Can't you schedule in advance? Does that not come with a price at the time of scheduling?
Re: Uber's "Route-Based Pricing" Predicts How Much You're Willing to Pay
#43> “Society is more willing to accept wealthy people paying higher fares,” said Chris Knittel, a business professor at the Massachusetts Institute of Technology. “But if the repercussion of lower fares in lower-income places is longer wait times, that’s probably what they want to keep an eye on." I can't help but recall all the times Uber or its defenders claimed that its supposedly uniform fare scale meant that it co…
the flip side is that they are redistributing the wealth such that it seems the wealthy passengers subsidize the cost for poorer people.
Re: Uber's "Route-Based Pricing" Predicts How Much You're Willing to Pay
#44Was that a $3.33 fare the video? The minimum fare in Sydney, Australia is $8AUD ($6USD).
do they have uber pool? pool is usually around 3 or less
Re: Uber's "Route-Based Pricing" Predicts How Much You're Willing to Pay
#45Of course every company and industry wants to price services this way, but few are able to. Why is that? There are two different ways that I'm thinking about this.
Monopolistic Power:
The ability to price a product/service based on a customer's willingness to pay and not the product's cost is the key sign of a company's monopolistic power. Most companies and industries do not have the privilege of pricing this way. But a select few can charge customers their maximum willingness to pay, and reap huge rewards. Think Google's ad bidding model.
People who have been saying that Uber, Lyft and other rideshare companies are perfect substitutes might have an issue explaining this monopolistic power. The high-competition model for the rideshare industry would mean rides are priced on cost, not on value.
Allocation of Fixed, Perishable Inventory:
Some industries, for example airlines and hotels, have ~100% fixed, perishable inventory. A hotel room at the Hilton in Chicago has different for every night, and it's impossible to sell a room for a date in the past. It's also very hard for them to grow or shrink their airline seats/hotel rooms for a given period of demand.
Similarly, when an Uber driver is looking for work and an Uber customer is looking for a ride - the Uber driver is in a specific place at a specific time, and the Uber customer's demand is for a ride at that given time from that given place. If the price isn't satisfactory for both parties, the ride doesn't occur, and both lose out.
Even if there were 100 ride companies with intense competition, you could imagine the pricing changing based on perceived value. Airlines have immense competition (and historically limited profits), but still price based on value. Also worth noting, Uber not only can charge customers value-based pricing, but can also estimate the driver's willingness to work for a given price, and pay based on that amount.
Re: Uber's "Route-Based Pricing" Predicts How Much You're Willing to Pay
#46Earlier quoted context omitted.
They were losing money on you before by subsidizing your ride. Now their price better reflect the actual economic costs, and it's not surprising that this means you don't take a taxi as often.
Doesn't seem like we can know that for sure without knowing their complete costs per ride. Even at the higher price that might still be true. It might not. What we do know is that the algo isn't based on their cost, its trying to figure out the max it can charge me and "get away with it". I'm suggesting that its time horizon is much too small. It was enough to chase me away. That might be what they wanted. It may not…
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Re: Uber's "Route-Based Pricing" Predicts How Much You're Willing to Pay
#47Earlier quoted context omitted.
Let me try to demystify what we're talking about, and show competition works fine even in this scenario. Let's say a ride is worth $20 for the consumer and $12 for the producer, for a total surplus of $8. If the price they agree on is $14, the consumer surplus is $6 and the producer surplus is $2. If the producer can be sure the consumer values the ride at $20, they can charge $19 and take home most of the surplus. N…
You're describing a "race to the bottom" those 2 competing producers would participate in. But we all know that when there's a quasi-monopoly with only 2/3 big players, they would "cooperate" to maintain the high prices. Phone providers are a good example of this: In France for many years there was phone providers with extremely high prices: 50, 60, or even 70 euros per month for unlimited plans. They were all tellin…
> But we all know that when there's a quasi-monopoly with only 2/3 big players, they would "cooperate" to maintain the high prices.
> In France for many years there was phone providers with extremely high prices
It's a lot easier to spin up a new taxi app that undercuts Uber/Lyft than it is to build new telecom infrastructure.
Nothing's stopping Newber from showing up with a shiny new app and undercutting both, if consumers are upset enough.
Re: Uber's "Route-Based Pricing" Predicts How Much You're Willing to Pay
#48I have trouble seeing how this is supposed to work. In the short run, my willingness to pay Uber is roughly "whatever Lyft is charging for the same route." In the long run, if Uber and Lyft somehow collude to increase prices a lot, I buy another car and use both services much less. My short-run behavior won't tell them where this threshold lies, and once it has happened it is too late for them to get my business back…
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Re: Uber's "Route-Based Pricing" Predicts How Much You're Willing to Pay
#49Its funny. When I first started using Uber, every time I took a ride and paid the fair its was almost a joyous experience to pay what seemed like so little. It made me want to use Uber for all sorts of trips and tell everyone else to do the same. Now every time I open it, it feels like just a liiittle too much to use for anything but a very occasional trip. They get more from me for each trip I now almost never take.…
They were losing money on you before by subsidizing your ride. Now their price better reflect the actual economic costs, and it's not surprising that this means you don't take a taxi as often.
Uber has been profitable in most developed markets* for over a year, this is just meant to squeeze them further so they can subsidize new ones.
We are going to live in a bold new world, where getting picked up at Whole Foods costs X% more than a Grocery Outlet across the street. It's really amazing how loose they are with ethics and how willing to court controversy.
*Uber points to profits in all developed markets https://www.ft.com/content/afa1d4de-33bc-11e6-bda0-04585c31b...
Re: Uber's "Route-Based Pricing" Predicts How Much You're Willing to Pay
#50I have trouble seeing how this is supposed to work. In the short run, my willingness to pay Uber is roughly "whatever Lyft is charging for the same route." In the long run, if Uber and Lyft somehow collude to increase prices a lot, I buy another car and use both services much less. My short-run behavior won't tell them where this threshold lies, and once it has happened it is too late for them to get my business back…
I believe Uber's tactic is to be the "last man standing". This seems to be a money pit, and the ones who fund it continuously know about it. It's a game of patience. When taxis will be nullified, and competition will have ran out of money, then and only then they will be the crowned. A Pyrrhic victory if you may. As for the ethics of Uber, it is like the $1 billion in my bank account. It doesn't exist :)
Even a hypothetical taxi monopoly faces close substitutes: owning a car for locals, renting a car for travelers. I still don't see that much room for price discrimination.
The "Standard oil strategy" of losing money to drive your competitors out of business doesn't really seem to work. If Uber declares victory and jacks up prices, presumably they will have a dozen new competitors the next week. How long did it take substitutes to pop up when Uber and Lyft left Austin?
What an actually evil Uber does at this stage is climb into bed with the regulators, suggesting all kinds of new regulations to kick the ladder down behind them. Uber doesn't seem to be going down that route so far.