The Uber Impact on NYC Transportation

I used Uber for the first time last month.  I was in NYC for work and, like many others that day in Midtown Manhattan, I needed to get to my next meeting.  I pulled up my Uber app and immediately saw how many potential drivers were near me.  I quickly set my pickup location and then received the make, model, and partial license plate number of the car coming, and received an estimate of my wait time (which was less than 2 minutes).  I told the driver my destination, which he dropped into his GPS, and a short drive later I was at my next meeting.  I got out of the car and my Uber app did the rest- automatic payment and automatic tip.  I even got a digital receipt for my expense report.

Uber is a player in what resembles a Cournot oligopoly.  There are a handful of firms that provide most of the transportation in and around NYC (Yellow Cab, Luxury Cab, Green Cab, the subway, and Uber).  For the most part there is no material difference in service.  As we have seen with Uber, there are barriers to entry like a strong infrastructure being in place and the correct laws being followed.  The number of taxis on the roads in NYC have remained fairly constant with the addition of Uber drivers even though the number of taxi pick-ups have declined.  Uber’s success in this market has been due to the differentiation of the experience of transportation.  You get picked up in someone’s personal car (which I presume they take better care of) and I don’t have to spend time paying and getting a receipt.  I get in and get out without swiping a card and I dont have to shove a receipt into whatever pocket is most easily accessible.  


Dr. Tufte said...

LightningMcQueen: 88/100 (you wrote "have" when you should have written "has", and you dropped an apostrophe on "don't"). I will take off 6 more points if you don't add a title to this post! But, I also won't take off for the hyphen.†

Left unsaid here is that taxis were probably operating as a monopoly before the advent of Uber. If the market is now a duopoly, what would we expect to happen to quantity and prices? We'd expect quantity supplied to go up, and price to go down. At least some of that is supported by the data in the source article. Generally speaking, Uber tends to be cheaper, so perhaps that part didn't need to be said.

Here's a weird implication. The rational response to the introduction of a second seller into a market is for the former monopolist to decrease the quantity they sell (to maintain high prices). But people tend to do the opposite, and that's supported by the data that the number of taxis on the street hasn't declined. That behavior is what goes on in a high/low price setting game. What's weird is that the end result doesn't even look like duopoly. It looks like perfect competition.

† I attribute this to keyboard standardization around word processors, but dashes tend to be used very badly these days. There are actually 3 of them: they hyphen, the en dash, and the em dash. They look like this - – —. You can see they have different lengths, and vertical positions. Historically, printers used them for different things ... and editors still expect those rules to be followed. The thing is, the hyphen is easy to find on your keyboard. The others are harder. The shortcut in Microsoft Word for them are to hold down the ALT key while typing the digits 0,1,5 and 0 on the numeric keyboard (the en dash), or 0,1,5, and 1 (that gets you the em dash). But most people don't know those tricks, so I don't take off points. Anyway, the usage of all three of them is explained at many sites, like The Punctuation Guide. What LightningMcQueen should have used was an em dash.

David said...

I love the Uber story. It is the perfect combination of technology (smartphones) and existing resources (cars and drivers) coming together to fill a consumer need and provide some much needed competition. As someone who has traveled by taxi only a few times, I can say that each experience was less than desirable.

The Uber experience is much different, because the drivers understand that consumers have options. The drivers also understand that they are not only competing against mass transit and rental car companies, but they are also competing against one another. In this consumer-review driven society that we have created, Uber drivers must work hard to maintain positive profile positive reviews. And in the end, the consumer wins.

Reddish Day said...

I am fascinated by Uber and how quickly the service has been embraced by those living in the larger cities as a mainstream form of transportation. What I have observed in San Diego is that Uber is used more regularly by the younger generation, who have also been quicker to embrace new technology and the "instant gratification" that often comes with use of technology to acquire goods and services. I have found that those in the older generations are less inclined to use the service, as they are often less comfortable with the technology required to line up their ride, and they express safety concerns. Targeted marketing and the media will play a big role in the growth of Uber, as they seek to capture the hearts and minds of the less technology savvy older generation. There have been some recent safety issues involving Uber passengers and drivers that received wide media attention. As more Uber drivers enter the market, due to the ease of doing so to make some quick money, Uber will need to expand it's consumer base. In order to do that, Uber will need to regulate their drivers consistently and get the message out to the masses that it's a safe and more efficient alternative to other modes of transportation.

Dr. Tufte said...

David: 50/50
Reddish-Day: 50/50.

David: there's a name for what you're describing — consumer sovereignty.

Reddish-Day: let's take your observation that younger people have an easier time with Uber, and run with it. What you're really saying is they are more likely to regard Uber as a substitute for a taxi. This makes their demand more elastic, and the mark-ups that they can be charged smaller: for both Uber and taxis. Currently, taxis are choosing to price themselves out of that market, by charging a bigger mark-up to people who don't trust Uber. How will that pan out? I wonder if taxi demand will become more elastic (for the older generation) and Uber demand will become less elastic (for the younger generation) so that ultimately the mark-ups are equalized ... and Uber is no longer a bargain.

FWIW: informal ride sharing arrangements have been common in D.C. for 20-30 years. So I think there was a need for something like Uber for a while, before it filled that void.