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> prices have to rise 6% (assuming no efficiency improvements via pool etc, which is frankly ridiculous) If Uber raises 6%, the revenue Uber will decrease. If

> prices have to rise 6% (assuming no efficiency improvements via pool etc, which is frankly ridiculous) If Uber raises 6%, the revenue Uber will decrease. If you raise the price, simply there will be less rides because people will find alternatives such as Lyft, taxi, or even public transportations.

bpodgursky 9y ago
An irrelevant percent of people will choose to take the bus because their $10 ride is now $10.50. I agree that they are competing against Lyft on price, but they will both sooner or later have to reach break-even; neither will run at a loss forever. Rides will shift between them, but the rideshare market as a whole will shrink trivially when it does.
- nullnilvoid 9y ago
  Many of my friends open both Lyft and Uber. They choose whichever is cheaper. Sure, Lyft might take a few more minutes to arrive. If you time it well ahead, it does not cost you more time. For me, I would rather take Lyft even if it is a little more expensive and takes a little longer. I hope Lyft catches up and makes it a real competition, which benefits consumers eventually.
  - threeseed 9y ago
    In Australia we only have Uber and taxis. Nobody is switching to taxis because of a 10% price increase. Because most people are using Uber for the fact that they will always come, always pick you up and always drop you off at the right spot. So it's fantastic that Lyft is doing okay in the US. But Uber is playing a whole different game.
    - inopinatus 9y ago
      This is incorrect. We have had private hire vehicles in Australia for years. Many of them are now also taking rides via Uber, but I've had black sedans to/from the airport for as long as I can remember. The only things Uber add to the service mix is an app and a bad attitude, neither of which create any value for me.
      - jpatokal 9y ago
        Private hire cars are not a realistic alternative to Uber or taxis in most cases, since they generally have to be booked well in advance. In Australia, they're also significantly more expensive than taxis.
        inopinatus 9y ago
        Wrong and wrong. I took one to the airport today, I called thirty minutes ahead, and it cost less than a metered fare.
        jpatokal 9y ago
        Where in Australia are you, and what company did you use? In both Sydney and Melbourne, all the hire cars I know of cost more.
        inopinatus 9y ago
        Melbourne, and I have a VHA account. Metered fares from my home to MEL are inflated by extensive never-ending roadworks. The fixed-rate private hire cars are excellent value for that route. For everything else it's a modest premium, and one I'm very happy to pay.
      - threeseed 9y ago
        I've never heard of private hire cars being used by consumers and ordinary people sure as hell aren't using them to goto the pub or shopping centre and back. What Uber brings to the table isn't high end hire cars but rather UberX which is a game changer for price and quality. Finally taxis can't refuse to take you somewhere or not use the GPS. And not sure how you had a "bad attitude" experience given how seriously drivers take their ratings.
        inopinatus 9y ago
        Let me correct you. I am a consumer and I use private hire cars, because I value their professionalism, cleanliness and punctuality which comes for a very modest premium. This often surprises Australians, so if you are one of them you're not alone. In my view Australia has a culturally ingrained reverse snobbery, which leads to false judgements about value and utility. The "bad attitude" I believe is clearly attributed to Uber, not their independent not-employees-at-all contractors, whose exploitation, low income, and zero benefits I have some limited sympathy for.
    - HXFIVE 9y ago
      Exactly. I'm in Australia and have no idea how Uber and taxi prices compare. I use Uber because of the quality of their product. Not a big fan of Uber as a company though. If Lyft of another viable competitor set up shop here then I'd be open to switching.
      - BigJono 9y ago
        I can give a very small sample of data. Uber is $30-33 to my suburb on a Thursday night. I even had a $28 once which is ludicrous (I calculated the theoretical minimum cost of the route to be around $27.50 so it was almost a perfect run). I've caught taxis on the exact same route twice because my phone was dead and I couldn't order an Uber. One was $48 and the other was $55. I believe it's more on a Friday or Saturday (they have some 'off-peak' fee or something), but Uber obviously has the occasional surge on those nights too. Using Taxis, in Melbourne at least, seems to be lighting money on fire.
- IAmGraydon 9y ago
  >An irrelevant percent of people will choose to take the bus because their $10 ride is now $10.50. That's not how the market works at scale.
  - threeseed 9y ago
    And not all markets behave the same. So pretending to know what Uber customers will do is asinine.
    - hedmundson 9y ago
      True, but Uber does know, and they probably have teams of data scientists and economists optimizing the fare charge to maximize revenue. My guess is that if Uber could eliminate their losses and suffer no decrease in fares by raising rates 6%, then they would have.
- throwaway434232 9y ago
  > they will both sooner or later have to reach break-even; neither will run at a loss forever. This. Subsidies don't scale. When you're company does relatively few rides, you can afford to subsidize rides on the order of dollars. The more rides you do however means can only subsidize rides less and less until it has a negligible effect on a rider's decision to switch providers. At that scale, all companies will start to move away from subsidies. Subsidies can't buy the same amount of market share at scale without losses growing linearly, which is unacceptable to investors. Subsidies will decline and should eventually disappear in mature markets even with fierce competition. Heavy subsidies really only make sense in immature markets where there is a land grab.
douche 9y ago
I'm so grateful that Uber exists, precisely for those places where those alternatives don't really exist, and so the choices are trying to bum a ride, or god forbid, driving drunk.
- Arizhel 9y ago
  You could just not get drunk...
  - douche 9y ago
    Haha, that is always an option... but I'd rather the drunks be able to use an app to get home, than fight the larger, and largely self-defeating battle of trying to convince or cajole people into not getting out of their heads.
    - Arizhel 9y ago
      I agree that trying to convince everyone to not drink and drive isn't likely to be successful, it's just that I thought from your comment that you were saying that you got drunk and had to deal with getting home. Sorry if I misunderstood.
    - the_duke 9y ago
      I have heard of this crazy thing. You call a number, and a car will magically appear and take you home. I think they call it Taxi service, or something.
sib 9y ago
> If Uber raises [prices] 6%, the revenue Uber [receives] will decrease. You are assuming facts not in evidence. If you don't know Uber's price elasticity of demand, you can't predict that. It is likely that the number of rides will decrease, but, if it decreases by less than ~6%, their total revenue will increase.
- nullnilvoid 9y ago
  It is a very competitive market. Customers are price-sensitive. I have many friends who open both Uber and Lyft and take whichever is cheaper. Right now, their prices are very close. If Uber raises 6%, their revenue will drop in my area. Besides, if it is that easy to turn a profit, Uber would have done it a while ago. A profitable business is much easier to justify under the current circumstances.
  - sib 9y ago
    >> Customers are price-sensitive [with varying levels of sensitivity for varying aspects of the service] That is the source of price elasticity of demand. Customers are not identical. Some people value convenience of only checking one app more than a small price difference. Some people value the speed of getting a car and if Uber can provide a car 3 minutes faster, may be willing to pay a few percent more. Some people prefer the UX of the Uber app and how fast it is to actually compute a trip / connect to a driver compared to Lyft. Some people are submitting expense reports and would prefer to have all their car service expenses from the same provider, for convenience. And some people don't. Just because Uber hasn't turned a profit (which they may have, in local areas, for all we know), doesn't mean they couldn't. It's completely rational for them to price low and attract more customers if they are more able to raise capital than their competitor in order to make it harder for their competitor to stay in business.

bpodgursky 9y ago

An irrelevant percent of people will choose to take the bus because their $10 ride is now $10.50. I agree that they are competing against Lyft on price, but they will both sooner or later have to reach break-even; neither will run at a loss forever. Rides will shift between them, but the rideshare market as a whole will shrink trivially when it does.

nullnilvoid 9y ago
Many of my friends open both Lyft and Uber. They choose whichever is cheaper. Sure, Lyft might take a few more minutes to arrive. If you time it well ahead, it does not cost you more time. For me, I would rather take Lyft even if it is a little more expensive and takes a little longer. I hope Lyft catches up and makes it a real competition, which benefits consumers eventually.
- threeseed 9y ago
  In Australia we only have Uber and taxis. Nobody is switching to taxis because of a 10% price increase. Because most people are using Uber for the fact that they will always come, always pick you up and always drop you off at the right spot. So it's fantastic that Lyft is doing okay in the US. But Uber is playing a whole different game.
  - inopinatus 9y ago
    This is incorrect. We have had private hire vehicles in Australia for years. Many of them are now also taking rides via Uber, but I've had black sedans to/from the airport for as long as I can remember. The only things Uber add to the service mix is an app and a bad attitude, neither of which create any value for me.
    - jpatokal 9y ago
      Private hire cars are not a realistic alternative to Uber or taxis in most cases, since they generally have to be booked well in advance. In Australia, they're also significantly more expensive than taxis.
      - inopinatus 9y ago
        Wrong and wrong. I took one to the airport today, I called thirty minutes ahead, and it cost less than a metered fare.
        jpatokal 9y ago
        Where in Australia are you, and what company did you use? In both Sydney and Melbourne, all the hire cars I know of cost more.
        inopinatus 9y ago
        Melbourne, and I have a VHA account. Metered fares from my home to MEL are inflated by extensive never-ending roadworks. The fixed-rate private hire cars are excellent value for that route. For everything else it's a modest premium, and one I'm very happy to pay.
    - threeseed 9y ago
      I've never heard of private hire cars being used by consumers and ordinary people sure as hell aren't using them to goto the pub or shopping centre and back. What Uber brings to the table isn't high end hire cars but rather UberX which is a game changer for price and quality. Finally taxis can't refuse to take you somewhere or not use the GPS. And not sure how you had a "bad attitude" experience given how seriously drivers take their ratings.
      - inopinatus 9y ago
        Let me correct you. I am a consumer and I use private hire cars, because I value their professionalism, cleanliness and punctuality which comes for a very modest premium. This often surprises Australians, so if you are one of them you're not alone. In my view Australia has a culturally ingrained reverse snobbery, which leads to false judgements about value and utility. The "bad attitude" I believe is clearly attributed to Uber, not their independent not-employees-at-all contractors, whose exploitation, low income, and zero benefits I have some limited sympathy for.
  - HXFIVE 9y ago
    Exactly. I'm in Australia and have no idea how Uber and taxi prices compare. I use Uber because of the quality of their product. Not a big fan of Uber as a company though. If Lyft of another viable competitor set up shop here then I'd be open to switching.
    - BigJono 9y ago
      I can give a very small sample of data. Uber is $30-33 to my suburb on a Thursday night. I even had a $28 once which is ludicrous (I calculated the theoretical minimum cost of the route to be around $27.50 so it was almost a perfect run). I've caught taxis on the exact same route twice because my phone was dead and I couldn't order an Uber. One was $48 and the other was $55. I believe it's more on a Friday or Saturday (they have some 'off-peak' fee or something), but Uber obviously has the occasional surge on those nights too. Using Taxis, in Melbourne at least, seems to be lighting money on fire.
IAmGraydon 9y ago
>An irrelevant percent of people will choose to take the bus because their $10 ride is now $10.50. That's not how the market works at scale.
- threeseed 9y ago
  And not all markets behave the same. So pretending to know what Uber customers will do is asinine.
  - hedmundson 9y ago
    True, but Uber does know, and they probably have teams of data scientists and economists optimizing the fare charge to maximize revenue. My guess is that if Uber could eliminate their losses and suffer no decrease in fares by raising rates 6%, then they would have.
throwaway434232 9y ago
> they will both sooner or later have to reach break-even; neither will run at a loss forever. This. Subsidies don't scale. When you're company does relatively few rides, you can afford to subsidize rides on the order of dollars. The more rides you do however means can only subsidize rides less and less until it has a negligible effect on a rider's decision to switch providers. At that scale, all companies will start to move away from subsidies. Subsidies can't buy the same amount of market share at scale without losses growing linearly, which is unacceptable to investors. Subsidies will decline and should eventually disappear in mature markets even with fierce competition. Heavy subsidies really only make sense in immature markets where there is a land grab.

douche 9y ago

I'm so grateful that Uber exists, precisely for those places where those alternatives don't really exist, and so the choices are trying to bum a ride, or god forbid, driving drunk.

Arizhel 9y ago
You could just not get drunk...
- douche 9y ago
  Haha, that is always an option... but I'd rather the drunks be able to use an app to get home, than fight the larger, and largely self-defeating battle of trying to convince or cajole people into not getting out of their heads.
  - Arizhel 9y ago
    I agree that trying to convince everyone to not drink and drive isn't likely to be successful, it's just that I thought from your comment that you were saying that you got drunk and had to deal with getting home. Sorry if I misunderstood.
  - the_duke 9y ago
    I have heard of this crazy thing. You call a number, and a car will magically appear and take you home. I think they call it Taxi service, or something.

sib 9y ago

> If Uber raises [prices] 6%, the revenue Uber [receives] will decrease. You are assuming facts not in evidence. If you don't know Uber's price elasticity of demand, you can't predict that. It is likely that the number of rides will decrease, but, if it decreases by less than ~6%, their total revenue will increase.

nullnilvoid 9y ago
It is a very competitive market. Customers are price-sensitive. I have many friends who open both Uber and Lyft and take whichever is cheaper. Right now, their prices are very close. If Uber raises 6%, their revenue will drop in my area. Besides, if it is that easy to turn a profit, Uber would have done it a while ago. A profitable business is much easier to justify under the current circumstances.
- sib 9y ago
  >> Customers are price-sensitive [with varying levels of sensitivity for varying aspects of the service] That is the source of price elasticity of demand. Customers are not identical. Some people value convenience of only checking one app more than a small price difference. Some people value the speed of getting a car and if Uber can provide a car 3 minutes faster, may be willing to pay a few percent more. Some people prefer the UX of the Uber app and how fast it is to actually compute a trip / connect to a driver compared to Lyft. Some people are submitting expense reports and would prefer to have all their car service expenses from the same provider, for convenience. And some people don't. Just because Uber hasn't turned a profit (which they may have, in local areas, for all we know), doesn't mean they couldn't. It's completely rational for them to price low and attract more customers if they are more able to raise capital than their competitor in order to make it harder for their competitor to stay in business.