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One thing that is so often left out of this conversation is that Uber was making a profit in rides when they only had the black car service and Lyft hadn't ente

One thing that is so often left out of this conversation is that Uber was making a profit in rides when they only had the black car service and Lyft hadn't entered the market yet with regular people driving their private cars. It's hard to tell how much of this is inherently unprofitable as opposed to different companies trying to price each other out of the market. This makes me wonder what even would be a natural or desired state of any market like this. I don't want companies to have agreements on bottom prices they aren't gonna go under. At the same time this dynamic clearly is fueled by the desire and promise to turn a profit once the competitor is gone. We don't want to set a monopoly in any market. On the other hand why aren't we seeing this in older industries? Why aren't airlines trying to drive each other out of business on price?

ksdale 6y ago
Airlines are notoriously bad investments over long-ish time scales, so that may not be the best example. I think for as much as people talk about businesses undercutting a market to capture it and then profiting from a monopoly position, very few businesses ever make it past the undercutting stage. As wrong as the efficient market hypothesis is about certain things, a great many industries actually do exist in a sort of perpetual state of trying to balance capturing market share with low prices with staying profitable.
prewett 6y ago
If Lyft can enter the market easily, then the market is a commodity market. A commodity market has very few returns. In fact, you can predict that it is a commodity market because of the existence of taxi monopolies. There is no barrier to entry to the taxi market: just get a car. Since there's no natural barrier to entry, they had to create a regulatory barrier to get profitability. Uber making a profit pre-Lyft is indicative of nothing; they are in a commodity market, so their returns will be low single-digits.

ksdale 6y ago

Airlines are notoriously bad investments over long-ish time scales, so that may not be the best example. I think for as much as people talk about businesses undercutting a market to capture it and then profiting from a monopoly position, very few businesses ever make it past the undercutting stage. As wrong as the efficient market hypothesis is about certain things, a great many industries actually do exist in a sort of perpetual state of trying to balance capturing market share with low prices with staying profitable.

prewett 6y ago

If Lyft can enter the market easily, then the market is a commodity market. A commodity market has very few returns. In fact, you can predict that it is a commodity market because of the existence of taxi monopolies. There is no barrier to entry to the taxi market: just get a car. Since there's no natural barrier to entry, they had to create a regulatory barrier to get profitability. Uber making a profit pre-Lyft is indicative of nothing; they are in a commodity market, so their returns will be low single-digits.