Wednesday, November 10, 2021

Uber Mathematics 5

Continuing a series of posts on Uber's business model.  Much of this material also applies to Lyft and other similar operations. For previous posts, see https://rvsoapbox.blogspot.com/search/label/Uber


Another thing about Uber is that it operates as a two-sided platform, matching passengers with drivers. Two-sided platforms can only operate successfully if there is sufficient demand on both sides - people looking for rides, drivers looking for work.

As I noted in an earlier post, Uber might initially have been able to recruit more drivers than it needed, in order to provide a high quality of service to its customers. Many people may have signed up as drivers based on unrealistic estimates of the likely earnings, costs and overheads, but obviously this is not sustainable for long.

So if Uber's pricing model can't pay the drivers enough to make the job worth doing, who would be surprised that Uber is now facing a shortage of drivers? While Uber customers experience increasing prices and worsening service levels.

So after years of what they regarded as unfair competition, traditional taxi services are now returning to popularity in large cities such as London (black) and New York (yellow).

But this has also resulted in an excess of demand over supply. In recent years, traditional cab driving has been hit by a triple whammy - competition from Uber et al, environmental regulations forcing older polluting vehicles off the road, and of course the COVID pandemic forcing many potential passengers to stay at home. So there is now a shortage of drivers and vehicles across the industry.




Will Dunn, Why is there an Uber shortage? (New Statesman, 8 November 2021)

Caroline Tanner, Why yellow cabs are (again) your best bet in New York City (MSN, November 2021)

James Tapper, Black cabs roar back into favour as app firms put up their prices (Guardian, 30 October 2021)

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