Uber: Riding the High End of the Demand Curve

I love the “excess capacity” thesis which in part appears to underly Uber — filling up the days of drivers who may not be booked solid for rides.  I also love the better user experience — bypassing a surly dispatcher for a phone app is winning.  But the confusing part is the pricing.  At at least 2X the price of a cab or black car ride (in New York, for Uber, rides from the airport to Manhattan are $70 from LGA and $85 from JFK), there are natural limits to how much market share this can capture.  It appears that Uber is following a strategy, aiming to get that part of the demand curve, willing to pay a large premium above the market price, whether it is customers who are price insensitive or customers at price insensitive times.  With the premium going to the drivers enabled by the premium prices, supply will be there to match demand.  But this is not a service likely to replace the existing market.  Scale will be achieved by applying the model and the technology in many geographic markets, rather than capturing large share within a market.

2 thoughts on “Uber: Riding the High End of the Demand Curve

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>