What’s the Latest?
Two industry disruptors, Uber and Lyft, are changing the way people commute in urban centers. This summer, the companies are rolling out new pricing schemes meant to outfox established taxi companies. “The price cut amounts to 20 percent in New York and 25 percent in San Francisco and Los Angeles. By the company’s math, that leaves the price of a ride lower than that of a taxi in New York, and in other cities the price is now significantly lower.” In some markets, Uber is forsaking its 20 percent commission to keep prices low. But why would a company purposefully take a loss on each transaction?
What’s the Big Idea?
The new prices are an experiment in stoking demand. If the cost of a single ride drops far enough, people may begin abandoning their cars for their daily commute or midday errand. The effect may be a low-margin business but one with a guaranteed demand for the foreseeable future. “The whole point of price cuts is to get UberX pricing below the cost of owning a car,” said Uber’s chief executive, Travis Kalanick. “Let’s say you take three or four trips a day on average. If we can get the price of UberX low enough, we can get to where it’s cheaper to take Uber than to own a car.”
Read more at the New York Times
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