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It’s quite complicated. For example, in economic studies of taxi services there’s a well-known “round trip” problem with rides that go from an urban center to a

by mlthoughts2018 8y ago

It’s quite complicated. For example, in economic studies of taxi services there’s a well-known “round trip” problem with rides that go from an urban center to a relatively less dense outerlying area. Around NYC this might be a ride from the financial district out to a far out region of Queens or something. Once you drop off the rider, you’re less likely to immediately pick up a new rider in that random outlying area, so there’s some “return trip” extra cost built for everybody, in terms of paying the driver to get back to a place with a lot of passengers, the driver spending time to get there, and society bearing a zero utilization period for the driver to get back. As a result, this typically makes prices for these rides go up to reflect all these built-in costs. And naturally this reaches some equilibrium that reflects what people in the outlying area are really willing to pay for the convenience, and somewhat weighted by the natural demand for rides there. But one criticism of Uber has been using investor capital to artificially reduce those costs down to levels totally unsustainable in terms of the actual demand and built-in costs. Essentially taking a loss to artificially over-service those areas, leading to huge increase of zero-utilization return trips and huge losses to cab companies that don’t have investor cash injections to artificially suppress the real prices in an attempt to win monopoly market share like Uber is trying to do. This is just one issue, and there are many more involving ride supply, driver pay, smart pricing, business pricing, etc. All these things combine to create a really complicated situation for the TLC to genuinely ensure that drivers are paid fairly and companies like Uber don’t just use investor cash injections to skyrocket unproductive “rides in waiting” floating around to artificially make rides more available for market capture. As a result, very simple policies that do not dig into operating details are unlikely to succeed at all and would be easily gamed, especially for larger operators.

alkonaut 8y ago
> one criticism of Uber has been using investor capital to artificially reduce those costs down to levels totally unsustainable in terms of the actual demand and built-in costs. Essentially taking a loss to artificially over-service those areas This would seem at first glance to either be a case of predatory pricing, or it is not? I still don’t see the why regulators shouldn’t separate the issue of minimum wage from the other issues (competition etc). Even if the regulation means killing Uber’s competitors, isn’t it the right decision to impose a minimum wage? Is there a similar debate about e.g what a minimum wage does to small vs large actors in retail? If Uber uses a dominating market position unfairly or uses predatory pricing with investor money that should be addressed, but if Uber needs to “pad” their drivers wages $2 per hour and Lyft needs to pad $4 to reach minimum level due to Uber being able to use its size to get higher utilization, then that seems like competition as it should work? I appreciate your attempt to explain why and how this is complicated - and I apologize for being thick here.
- mlthoughts2018 8y ago
  > “if Uber needs to “pad” their drivers wages $2 per hour and Lyft needs to pad $4 to reach minimum level due to Uber being able to use its size to get higher utilization, then that seems like competition as it should work?” The problem is that Uber’s higher utilization is an arbitrary metric, and if we’re picking arbitrary metrics, why would we pick one that intrinsically entrenches the current market leader? Just because Uber’s utilization might be higher than Lyft’s, that doesn’t mean either one of them is operating with a satisfactory utilization or an unsatisfactory one. What if Uber operated at 99% utilization, and Lyft at 95%. At that point, offering any financial incentive based on ranked utilization would be a huge waste of taxpayer money. Meanwhile, if Uber and Lyft are at 15% and 10% utilization, it’s equally a waste to reward because those are such bad numbers that society is enduring major congestion costs. Here’s an analogy. Suppose in the US that the government decided sports teams are a morally bad influence on society due to executive and athlete behavior. As a result, they will reduce your team’s roster size unless you donate money to charity. Suppose they were to “unlock” one new roster spot for every $1 million of charity donation. That seems possibly fair. Teams can each decide if it’s worth it, and it’s a flat fee affordable even by the least financially well-backed teams. But instead suppose they tallied up all the donatioms to charity and ranked each team. The top team gets all roster spots, the next team gets most of them, and so on down to the teams that did not donate, which get no roster spots unlocked. What’s the problem with the second model? It seems like a nice auction sort of way to do it, and that’s fair right? Well one problem is that the whole point was to raise money for charity to offset ethical problems, and the auction method does not necessarily cause much donation to happen, only enough to be the winner, say. The winning team might have only donated $500k total, but they are still rewarded like they did something awesome. Society loses out. The second problem is that it intrinsically favors teams with more money. They can buy the roster spots just based on their size, regardless of whether it is addressing the underlying ethical problem. For big teams it’s just a cost of doing business and the players can keep on doing cocaine in the hotel room, who cares. But for the small teams, even if they want to reform the underlying problem, they may not be able to afford to unlock roster spots, which reinforces that they won’t make as much money from winnings, which keeps them unable to buy future roster spots, and so on. The utilization reward policy is like this in many ways. It doesn’t reward based on absolute levels of utilization or improvement of utilization... it intrinsically rewards based on your ranked utilization, which just reinforces the market share of existing operators.

alkonaut 8y ago

> one criticism of Uber has been using investor capital to artificially reduce those costs down to levels totally unsustainable in terms of the actual demand and built-in costs. Essentially taking a loss to artificially over-service those areas This would seem at first glance to either be a case of predatory pricing, or it is not? I still don’t see the why regulators shouldn’t separate the issue of minimum wage from the other issues (competition etc). Even if the regulation means killing Uber’s competitors, isn’t it the right decision to impose a minimum wage? Is there a similar debate about e.g what a minimum wage does to small vs large actors in retail? If Uber uses a dominating market position unfairly or uses predatory pricing with investor money that should be addressed, but if Uber needs to “pad” their drivers wages $2 per hour and Lyft needs to pad $4 to reach minimum level due to Uber being able to use its size to get higher utilization, then that seems like competition as it should work? I appreciate your attempt to explain why and how this is complicated - and I apologize for being thick here.

mlthoughts2018 8y ago
> “if Uber needs to “pad” their drivers wages $2 per hour and Lyft needs to pad $4 to reach minimum level due to Uber being able to use its size to get higher utilization, then that seems like competition as it should work?” The problem is that Uber’s higher utilization is an arbitrary metric, and if we’re picking arbitrary metrics, why would we pick one that intrinsically entrenches the current market leader? Just because Uber’s utilization might be higher than Lyft’s, that doesn’t mean either one of them is operating with a satisfactory utilization or an unsatisfactory one. What if Uber operated at 99% utilization, and Lyft at 95%. At that point, offering any financial incentive based on ranked utilization would be a huge waste of taxpayer money. Meanwhile, if Uber and Lyft are at 15% and 10% utilization, it’s equally a waste to reward because those are such bad numbers that society is enduring major congestion costs. Here’s an analogy. Suppose in the US that the government decided sports teams are a morally bad influence on society due to executive and athlete behavior. As a result, they will reduce your team’s roster size unless you donate money to charity. Suppose they were to “unlock” one new roster spot for every $1 million of charity donation. That seems possibly fair. Teams can each decide if it’s worth it, and it’s a flat fee affordable even by the least financially well-backed teams. But instead suppose they tallied up all the donatioms to charity and ranked each team. The top team gets all roster spots, the next team gets most of them, and so on down to the teams that did not donate, which get no roster spots unlocked. What’s the problem with the second model? It seems like a nice auction sort of way to do it, and that’s fair right? Well one problem is that the whole point was to raise money for charity to offset ethical problems, and the auction method does not necessarily cause much donation to happen, only enough to be the winner, say. The winning team might have only donated $500k total, but they are still rewarded like they did something awesome. Society loses out. The second problem is that it intrinsically favors teams with more money. They can buy the roster spots just based on their size, regardless of whether it is addressing the underlying ethical problem. For big teams it’s just a cost of doing business and the players can keep on doing cocaine in the hotel room, who cares. But for the small teams, even if they want to reform the underlying problem, they may not be able to afford to unlock roster spots, which reinforces that they won’t make as much money from winnings, which keeps them unable to buy future roster spots, and so on. The utilization reward policy is like this in many ways. It doesn’t reward based on absolute levels of utilization or improvement of utilization... it intrinsically rewards based on your ranked utilization, which just reinforces the market share of existing operators.