5 ms·

Its a cab ride. How important is reputation? I don't think it's that important.

rayiner 14y ago
Quality control in the free-market is all about reputation. You don't buy a Dell laptop again after getting a crappy one. In some industries, however, the market fails to regulate quality by itself. E.g. in the food industry, people can't see measure directly, and when people get sick from invisible contamination, they usually can't precisely trace their sickness to specific food. E.g. in the medical industry, people are rarely repeat customers. You're unlikely to go back to the same heart surgeon because you had a good experience with them the first time. Cabs fall in the latter bucket. Because cabbies almost never get repeat customers, and because cabs are selected based on location not reputation or quality, cabbies have no incentive to provide good, safe service. And even if customers were willing to pay more money for better service or safety, they would have very little way to express that through who they hired.
theorique 14y ago
Suppose these are consistent experiences with two different companies, for you and all your friends and family. Company A: - driver smokes - driver shows up late - driver doesn't speak English - driver drives dangerously Company B: - driver communicates well - driver arrives right on time - driver drives quickly and safely - driver offers you a choice of different routes In what sense could reputation not matter?
- viscanti 14y ago
  I imagine the response was in regards to cabs, where reputation doesn't matter. If you replaced Company A and Company B, with Taxi Driver A and Taxi Driver B, you'd see a system where reputation doesn't matter (especially if they can legally keep people from competing with them on price). Reputation does matter when it comes to hiring a car from a company like Uber. If they blow it, I have a real option of not using them anymore.

Quality control in the free-market is all about reputation. You don't buy a Dell laptop again after getting a crappy one. In some industries, however, the market fails to regulate quality by itself. E.g. in the food industry, people can't see measure directly, and when people get sick from invisible contamination, they usually can't precisely trace their sickness to specific food. E.g. in the medical industry, people are rarely repeat customers. You're unlikely to go back to the same heart surgeon because you had a good experience with them the first time. Cabs fall in the latter bucket. Because cabbies almost never get repeat customers, and because cabs are selected based on location not reputation or quality, cabbies have no incentive to provide good, safe service. And even if customers were willing to pay more money for better service or safety, they would have very little way to express that through who they hired.

theorique 14y ago

Suppose these are consistent experiences with two different companies, for you and all your friends and family. Company A: - driver smokes - driver shows up late - driver doesn't speak English - driver drives dangerously Company B: - driver communicates well - driver arrives right on time - driver drives quickly and safely - driver offers you a choice of different routes In what sense could reputation not matter?

viscanti 14y ago
I imagine the response was in regards to cabs, where reputation doesn't matter. If you replaced Company A and Company B, with Taxi Driver A and Taxi Driver B, you'd see a system where reputation doesn't matter (especially if they can legally keep people from competing with them on price). Reputation does matter when it comes to hiring a car from a company like Uber. If they blow it, I have a real option of not using them anymore.