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> but I think the reality is that it will turn out to be much more like the airline business - basically a commodity business where raising prices is extremely

by speby 8y ago

> but I think the reality is that it will turn out to be much more like the airline business - basically a commodity business where raising prices is extremely difficult. I believe you are onto something there. What did people do before Lyft/Uber? They walked more. They biked. They took public transportation. Maybe they drove themselves. Maybe they drove/carpooled with a friend. Maybe they took a good old fashioned taxi. Faced with a price hike attempt, those options are again always on the table.

baddox 8y ago
Sounds like you’re talking about the price elasticity of demand. You describe airline travel (at least for personal economy class flights) to be fairly inelastic, meaning that if the price rises even a little bit, a lot of people will just drive or not take the trip. That certainly rings true to me. I recently bought US domestic flights home for Christmas, and I certainly chose the absolute cheapest flight that fit the schedule and had less than 2 hours of layover. The price was already brutal, and I felt like I was very near the top of my price tolerance. But I feel like the Lyft/Uber mode of transport is generally more spontaneously and is therefore generally more elastic. Sure, there are undoubtedly some inelastic use cases, like regular commutes, but there are also some very elastic use cases, like a ride home from the bar or a rescue from the rain. I am definitely interested to see how the breakdown of these different use cases turns out to be, but for me and my friends and peers in the SF Bay Area, the latter use case definitely dominates. https://en.m.wikipedia.org/wiki/Price_elasticity_of_demand https://en.m.wikipedia.org/wiki/Price_elasticity_of_demand
- gaius 8y ago
  very elastic use cases, like a ride home from the bar or a rescue from the rain They manage demand via surge pricing, I thought. So is it really elastic?
  - sarreph 8y ago
    I think it’s probably more like them capitalising on the elastic nature of the demand for these scenarios. Definitely an element of control as well though, as there is increased demand too (but it’s likely more elastic and therefore more tolerant to price increases).
  - jazzdev 8y ago
    They also manage availability by surge pricing. It not only discourages riders, but it also encourages more drivers to work.
- ghaff 8y ago
  Historically, I would have said that taking taxis was fairly price inelastic. You knew it would be relatively expensive but you either didn't care or it was really the only practical way to get from Point A to Point B. However, my sense is that for at least certain locations/demographics, that's probably changed with Uber/Lyft. I don't personally use them much but anecdotally a lot of people have started using them as an alternative to public transit or just because it's easier if they're going out for a night on the town. And I work with a lot of people for whom the reflex seems to be to pull out a smartphone anytime they need to go more than a few blocks while traveling. I expect those behaviors would change if the price suddenly went to 2X. (It also definitely makes a difference at the margins when renting cars and that's mostly a straightforward price calculation.)
- joshuaali 8y ago
  It's actually the other way around: demand is said to be inelastic if changes in price have little impact on it.
  - baddox 8y ago
    Ugggh, yes, no matter how much I read about this stuff I will always get that backwards. I think I always mix it up because I think of the price tolerance being elastic instead of the demand being elastic.

by speby 8y ago

baddox 8y ago

Sounds like you’re talking about the price elasticity of demand. You describe airline travel (at least for personal economy class flights) to be fairly inelastic, meaning that if the price rises even a little bit, a lot of people will just drive or not take the trip. That certainly rings true to me. I recently bought US domestic flights home for Christmas, and I certainly chose the absolute cheapest flight that fit the schedule and had less than 2 hours of layover. The price was already brutal, and I felt like I was very near the top of my price tolerance. But I feel like the Lyft/Uber mode of transport is generally more spontaneously and is therefore generally more elastic. Sure, there are undoubtedly some inelastic use cases, like regular commutes, but there are also some very elastic use cases, like a ride home from the bar or a rescue from the rain. I am definitely interested to see how the breakdown of these different use cases turns out to be, but for me and my friends and peers in the SF Bay Area, the latter use case definitely dominates. https://en.m.wikipedia.org/wiki/Price_elasticity_of_demand https://en.m.wikipedia.org/wiki/Price_elasticity_of_demand

gaius 8y ago
very elastic use cases, like a ride home from the bar or a rescue from the rain They manage demand via surge pricing, I thought. So is it really elastic?
- sarreph 8y ago
  I think it’s probably more like them capitalising on the elastic nature of the demand for these scenarios. Definitely an element of control as well though, as there is increased demand too (but it’s likely more elastic and therefore more tolerant to price increases).
- jazzdev 8y ago
  They also manage availability by surge pricing. It not only discourages riders, but it also encourages more drivers to work.
ghaff 8y ago
Historically, I would have said that taking taxis was fairly price inelastic. You knew it would be relatively expensive but you either didn't care or it was really the only practical way to get from Point A to Point B. However, my sense is that for at least certain locations/demographics, that's probably changed with Uber/Lyft. I don't personally use them much but anecdotally a lot of people have started using them as an alternative to public transit or just because it's easier if they're going out for a night on the town. And I work with a lot of people for whom the reflex seems to be to pull out a smartphone anytime they need to go more than a few blocks while traveling. I expect those behaviors would change if the price suddenly went to 2X. (It also definitely makes a difference at the margins when renting cars and that's mostly a straightforward price calculation.)
joshuaali 8y ago
It's actually the other way around: demand is said to be inelastic if changes in price have little impact on it.
- baddox 8y ago
  Ugggh, yes, no matter how much I read about this stuff I will always get that backwards. I think I always mix it up because I think of the price tolerance being elastic instead of the demand being elastic.