Uber Study by Hall & Krueger (2016) & Wallstein's

http://www.nber.org.mutex.gmu.edu/papers/w22843.pdf
https://www.ftc.gov/system/files/documents/public_comments/2015/06/01912-96334.pdf


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Also,

http://bruegel.org/2016/02/uber-and-the-economic-impact-of-sharing-economy-platforms/

In December Uber was valued at $68 billion, having taken just 6 years to surpass the valuation of 100-year-old companies like General Motors and Ford, as well as “traditional” transportation companies like Hertz and Avis[2].





Uber sets the price of the ride, and transactions happen through the online platform. 70-80% of each fare goes to the driver and the rest is kept by Uber.

Uber’s online platform is user-friendly, and its rates are generally lower than regular taxis[3]. Uber is cheaper in most major American cities, even excluding the taxi driver’s tip, as shown in Table 1 and 2.





Uber’s pricing model is dynamic, changing the price to equalize supply with demand. If there is high demand for rides and few drivers on the road (common at weekends or on national holidays), the price increases.

This motivates more drivers to work, and reduces the number of passengers, as some prefer other modes of transportation (for example regular taxis) if the price is high.

The app informs customers when “surge pricing” takes place, and the price of the increased fare, so there is no asymmetric information.

However the Uber pricing algorithm has raised antitrust concerns regarding whether it facilitates implicit collusion among drivers[4]. Critics point out that when competitors (drivers) agree on a pricing structure rather than competing against each other, this may qualify as price fixing.

Moreover, in many cities, Uber’s pricing depends on the speed of the ride. Regular taxis charge riders per mile when moving, and per minute when idling. Uber charges riders per mile and minute whether they’re moving or idling. So, Uber prices drop as speed increases, since it is charging simultaneously for the miles and the driving time. As a result, taxis may become a more attractive option during times of traffic (provided that they are available and can be reached).

In comparison to regular taxis, Uber has several advantages beyond lower fares. Instead of waiting in the street or calling a taxi service, passengers can request a car through Uber’s online platform and watch the car’s progress towards their location.

In addition, transactions are performed electronically (with the exception of India where passengers can pay in cash if they wish) and so passengers can travel without cash or cards.

Users can check the profile of the driver before selecting them and give their own opinion rating after the ride. This makes them feel safer than entering the car of a completely unknown driver. If the average rating of a driver is low, then they are dismissed by Uber.

Uber’s success has been detrimental to the traditional taxi industry. Taxis are heavily regulated: rates are fixed and taxis must buy licences to operate. Such licenses are issued rarely, and become more valuable as the urban population grows. In big US cities the price (before Uber’s operation) varied between $350,000 and $1,000,000, while in Paris licences cost around 240,000 euros[5].

However Uber has severely reduced the value of licenses, as Uber drivers do not need licenses to enter the market. Licenses no longer grant protection from competition. Taxi drivers are no longer able to sell off their licenses as expected, and they are not financially protected against such sudden devaluations.

In this way Uber’s entry has made things much more difficult for taxi drivers. In New York for example, the price of individual licenses dropped from $1 million in 2013 to $700,000-$800,000 in 2015, while in Chicago, they decreased by 33.3%. The asymmetry over the regulatory requirements (buy a taxi license vs. become an Uber driver for free) to enter the business creates unfair competition between the two.

Restrictions on the number of available taxi licenses vary across the world. In New York there are 13.5 taxis (including private hire vehicles) for every 1000 inhabitants, while in London there are 10.8, in Stockholm 7.8 and in Paris only 3.4[6]. The number of issued licenses may be affected by strong taxi lobbies that target high entry barriers, as in Paris and Brussels. Uber’s entry into the market has gradually reduced demand for traditional taxis. The number of trips by taxis in New York fell by 8% between 2012 and 2014 (Wallsten, 2015). The trend was even more acute in San Francisco,[7] where use of taxis declined by 65% in the two years after Uber’s entry[8].

However, the reported number of complaints per taxi ride in New York decreased after the Uber’s entry into the market (Wallsten, 2015[9]), suggesting that taxis unable to respond to Uber’s entry by reducing their regulated prices responded by improving their services.

We should note, however, that due to data restrictions, Wallsten is unable to quantify the magnitude of this quality effect of Uber on taxi services. Experience shows that in some cases, taxi unions reacted by modernizing their fleet and launching online apps to reduce search costs for passengers

Scott Wallsten (2015), ” The Competitive effect of the Sharing Economy: How is Uber Changing Taxis?”. Technology Policy Institute (attached)

The number of Uber drivers has increased exponentially in recent years, as individuals have found Uber a flexible way to top up their income. 61% of Uber drivers in Boston, Chicago, Washington, Los Angeles, New York and San Francisco have another job (Hall and Krueger, 2015).

However, Uber drivers are considered independent contractors, so they are not entitled to the minimum wage, paid vacations or health insurance. Earnings per hour for Uber drivers are higher than the hourly wages of taxi drivers and chauffeurs in Boston, Chicago, Washington, Los Angeles, New York and San Francisco (Hall and Krueger, 2015),[11]but estimated earnings for Uber drivers do not account for costs incurred during the trip but only for Uber fees.