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This article is written under the assumption both that Uber's only competition is cabs, and that once cabs are gone (and I agree that this seems inevitable), it

This article is written under the assumption both that Uber's only competition is cabs, and that once cabs are gone (and I agree that this seems inevitable), it will operate as a monopoly. At least in my market (Washington, DC), the former is not the case, and I see no reason to believe the latter will be the case anywhere. Given that, it's appropriate to evaluate Uber's market-forces claims with a view towards a larger market that includes more players than just Uber. Anecdotally, I've found that their claims about surge pricing mostly hold true: their service, while being priced higher at times of peak demand, seems to generally stay available in a way that cabs or other services don't, and at least sometimes, that has been worth it to me, and I've been willing to pay 2x the price to have a ride in ten minutes. That said, if it weren't, there's always Lyft or Sidecar (or, for the moment, traditional cabs), which would inevitably offer different tradeoffs of price and dispatch time, and I'm free to use any of them instead. If lots of consumers do the same, eventually Uber will lose, or market forces will force it to adjust how it balances availability with price. In other words, exactly the way a market is supposed to work.

zenogais 13y ago
This is a relatively ahistorical, naive view of the operation of markets. Even with competition, assuming fixed price cabs eventually get driven to extinction, then what? There would be nothing to stop the collusion of existing market competitors (Uber, Sidecar, and Lyft) in order to drive up pricing or perform market division (customer allocation) - that is assuming that monopolies don't begin to form in the market as they are liable to do. There is tremendous incentive and pressure from investors for them to both divide markets and fix prices (eg, maximize profit). New firms may enter the market in an attempt to undercut these forces, but they will likely be unable to compete with monopolized pricing by the large companies and thus be driven out of business before reaching any sort of reasonable scale. These kinds of phenomena, far from being anomalies, are the traditional way in which really existing markets work [1][2][3][4][5]. Ultimately, the resolution of such problems occurs not through the markets - which instead create such problems - but instead through the mobilization of state forces (eg. lawsuits and monopoly busting). This article just highlights the strong potential for these problems and more to form in the developing taxi service market some time in the near future and the algorithmic obfuscation used to give these forces the appearance of neutrality and legitimacy. [1]: http://www.fbi.gov/news/stories/2013/september/guilty-pleas-show-high-cost-of-price-fixing-in-auto-industry http://www.fbi.gov/news/stories/2013/september/guilty-pleas-... [2]: http://en.wikipedia.org/wiki/Sherman_Antitrust_Act http://en.wikipedia.org/wiki/Sherman_Antitrust_Act [3]: http://www.theverge.com/2014/2/1/5368098/apple-hit-with-840-million-damages-claim-in-ebooks-lawsuit http://www.theverge.com/2014/2/1/5368098/apple-hit-with-840-... [4]: http://www.tomshardware.com/news/microsoft-office-price-fixing,7533.html http://www.tomshardware.com/news/microsoft-office-price-fixi... [5]: http://en.wikipedia.org/wiki/Price_fixing_cases http://en.wikipedia.org/wiki/Price_fixing_cases
- apendleton 13y ago
  Right, I wasn't proposing a completely-unregulated market. Presumably collusion and other anti-competitive behavior would remain illegal. In any event, different behaviors towards fluctuating prices are already observable as differentiators amongst different competitors in this space (Lyft has surge pricing, but it's less aggressive, and Sidecar lets drivers set their own prices rather than controlling it centrally). What evidence is there to suggest that that would stop once cabs disappear?

zenogais 13y ago

This is a relatively ahistorical, naive view of the operation of markets. Even with competition, assuming fixed price cabs eventually get driven to extinction, then what? There would be nothing to stop the collusion of existing market competitors (Uber, Sidecar, and Lyft) in order to drive up pricing or perform market division (customer allocation) - that is assuming that monopolies don't begin to form in the market as they are liable to do. There is tremendous incentive and pressure from investors for them to both divide markets and fix prices (eg, maximize profit). New firms may enter the market in an attempt to undercut these forces, but they will likely be unable to compete with monopolized pricing by the large companies and thus be driven out of business before reaching any sort of reasonable scale. These kinds of phenomena, far from being anomalies, are the traditional way in which really existing markets work [1][2][3][4][5]. Ultimately, the resolution of such problems occurs not through the markets - which instead create such problems - but instead through the mobilization of state forces (eg. lawsuits and monopoly busting). This article just highlights the strong potential for these problems and more to form in the developing taxi service market some time in the near future and the algorithmic obfuscation used to give these forces the appearance of neutrality and legitimacy. [1]: http://www.fbi.gov/news/stories/2013/september/guilty-pleas-show-high-cost-of-price-fixing-in-auto-industry http://www.fbi.gov/news/stories/2013/september/guilty-pleas-... [2]: http://en.wikipedia.org/wiki/Sherman_Antitrust_Act http://en.wikipedia.org/wiki/Sherman_Antitrust_Act [3]: http://www.theverge.com/2014/2/1/5368098/apple-hit-with-840-million-damages-claim-in-ebooks-lawsuit http://www.theverge.com/2014/2/1/5368098/apple-hit-with-840-... [4]: http://www.tomshardware.com/news/microsoft-office-price-fixing,7533.html http://www.tomshardware.com/news/microsoft-office-price-fixi... [5]: http://en.wikipedia.org/wiki/Price_fixing_cases http://en.wikipedia.org/wiki/Price_fixing_cases

apendleton 13y ago
Right, I wasn't proposing a completely-unregulated market. Presumably collusion and other anti-competitive behavior would remain illegal. In any event, different behaviors towards fluctuating prices are already observable as differentiators amongst different competitors in this space (Lyft has surge pricing, but it's less aggressive, and Sidecar lets drivers set their own prices rather than controlling it centrally). What evidence is there to suggest that that would stop once cabs disappear?