# The price cut is not about increasing demand



## Miami1121 (Jan 9, 2015)

Uber claims to be doing this to increase demand, however people are willing to pay up to and maybe even more than a cab. Ask your riders, I did. This is about going after lyft and sidecar, nothing else at the expense of the driver. Rates will go back up, but who knows when. The lower prices are not all of a sudden going to get new people to download the app and use uber and they know this. It is just their excuse for the price cut. They claim the lower fares will mean more driving. Who the hell wants more driving to make the same money? I want to drive less and make more, not the other way around! They also want you to refer more drivers to make more $. Really? Just want I want, more drivers to compete with. Below is their canned response to a complaint made to them about the fare reduction:

Thanks so much for reaching out. We appreciate your feedback regarding this price change and wanted to provide a little more insight into a pricing structure that we believe will have a positive effect on your earning potential in these markets.

We are confident that this price change will not have a negative effect on your trip revenue. We want to assure you that we are going to be closely monitoring the pricing's impact over the next month to ensure that this is a positive change for your business.

More low-cost options for riders will ensure that your business is competitive. Our hope is that the new pricing structure will increase demand and make your time on the road busier and therefore more valuable for you, our partners.

To ease the transition and help you rest a little easier — since we know that any change can be uncomfortable at first — we will continue to offer strong incentives while you drive on the Uber system. As always, you can earn even more money when you invite your friends to drive with Uber through our referral program.

We couldn't be Uber without you and your success is our success. We're committed to you, and as always, we welcome your feedback as we partner toward providing better transportation options and entrepreneurial opportunities in our cities.

Best,


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## BlkGeep (Dec 7, 2014)

Rates will never go back. Period. They are not temporary.


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## painfreepc (Jul 17, 2014)

Uber is no longer just trying to replace taxis, uber wishes to replace the city bus, T.k. said so on the uber blog.


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## The GOAT (Jan 9, 2015)

Uber is executing a campaign to discipline its workforce. They don't need the revenue as they have investors in the hundreds of millions of dollars to fund this disciplining campaign. So what do I mean by discipline?

Uber is looking to the long term. It eventually wants to go to contracts with its drivers, ensuring that they don't ever work for any other service. Until then, this arrangement is what they will do. The fare guarantee ensures you can't drive for another service. Also, the reduced rates mean that you have to work loooooong hours in order to come close to what you were making before. Uber's analytics know all of this. This is why they are doing it.

REMEMBER!!!!

Uber makes money off commission, so they are taking a profit cut here as well. But for them it is worth it to ensure that which is important, that the driver is sufficiently disciplined for the long haul. Put more simply, this is a war between Uber and the driver. Uber is winning but the drivers have more built in advantages. Only real problem is that most drivers don't realize yet that they are in a battle at all. Most of them think Uber management is 'stupid'. It will take these drivers to stop being stupid themselves if they are ever to see their fortunes improve.


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## Actionjax (Oct 6, 2014)

I think there is more than one answer to this but an increase in ridership is one of them. Lets face it with all the legal battles in some cities it's the people they are counting on to keep Uber going in their city. Drivers are just collateral damage.

Also if you kill your competition in a market you ultimately win as a company. You own transportation in a city. Then it's all hail our Uber overloards.


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## UberHammer (Dec 5, 2014)

Miami1121 said:


> This is about going after lyft and sidecar, nothing else at the expense of the driver. Rates will go back up, but who knows when.


I agree this is about Lyft and Sidecar, but I disagree with the assumption that rates will go back up.

Uber's price cuts are about eliminating the competition. When the competition can charge less than you, then they have an edge on you. So Uber is making sure their competition cannot gain that edge on them.

To do so, they need to find the lowest price rideshare drivers are willing to work at. Essentially, finding this amount is no different than how surge pricing works, accept that it's a process that takes longer to determine.

Surge pricing is nothing more than the free market determining just how much riders are willing to pay for a ride when demand exceeds supply. Uber continues raising the price until rider demand begins to decrease. At that point you've got the highest rate.

Rate cuts are exactly the same, except on the supply side. Rate cuts are nothing more than the free market determining just how much drivers are willing to accept for a ride when supply exceeds demand. Uber continues dropping the price until driver supply begins to decrease. At that point you'v got the lowest rate.

Once Uber knows the lowest rate, it would be foolish to raise base rate above them. They should only increase the price of a ride when demand begins to outweigh supply, and that mechanism already exists with surge pricing. When supply exceeds demand Uber needs to charge what the free market results in as the base rate, or else they leave an edge for the competition to exploit.

Sorry guys, as long as enough drivers are willing to drive at these base rates, they won't ever go up without surges.

This will after time create a serious social safety issue. Because any rate Uber charges is better than $0 to a person who has no job but is fortunate to own a qualifying Uber car. But as they drive and drive and drive, their tires go bald and their brakes get worn down to the iron. Do they use their $3/hr they are making driving for Uber to pay for new tires and brakes, or put food on the table for their family? Most will buy the food, pay the rent and utilities and delay the needs of their car a "little" longer. Or they will drive more hours hoping to earn a little more to afford the maintenance. So now society has thousands of Uber drivers is desperate need of sleep driving cars with bald tires and worn brakes. People are going to get killed. But hey, it's just the free market setting the price for this service, right? Social safety is NOT Uber's problem... at least until society calls their isolation theory BS!


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## Tom Madison (Aug 11, 2014)

I suggested on another post that Uber's recent round of price cuts fly in the face of economic reality...rider demand is relatively inelastic when it comes to price for the vast majority of users. My daughter and her friends are not going to use Uber 20% more as a result of the price cut and when I asked what level price increase would change behavior most thought 50%. While the pool of new riders is far from tapped in most markets, the growth will be slow, but the dedicated regular users who make up the core are not going anywhere...they love this service! What are they going to do? Take a taxi? The bus? Unlikely!

However, if overall ride volume goes up Uber wins even if it means less in the pocket for drivers (err, partners). There is not a whole lot that we can do about this and I think that everyone needs to determine whether continuing to drive makes sense. Personally, I am at the tipping point...I have a 4.85 rating after about 300 trips and drive 12-15 hours per week which is enough to cover the cost of my hockey season tickets and I meet some interesting people.


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## UberFrolic (Sep 18, 2014)

Uber is trying to dig their claws deep into every major city. Because when it comes to regulation time, residents of those city will petition for uber to stay because they have depended on it for so long. 

Travis wants to make it cheaper than owning the car and taking the bus. He is not saying that in passing, he truly wants to be the CHEAPEST, but at the expense of his driver workforce. That is terrible business.


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## Tom Madison (Aug 11, 2014)

UberFrolic said:


> Uber is trying to dig their claws deep into every major city. Because when it comes to regulation time, residents of those city will petition for uber to stay because they have depended on it for so long.
> 
> Travis wants to make it cheaper than owning the car and taking the bus. He is not saying that in passing, he truly wants to be the CHEAPEST, but at the expense of his driver workforce. That is terrible business.


The point about eliminating car ownership is interesting. Not only do low prices push out competitors like Lyft and Sidecar, they also have an impact on services like Car2Go and Zipcar. While you are probably not going to use Uber for a trip to Ikea, it makes sense for a lot of other errands.


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## Miami1121 (Jan 9, 2015)

I agree this service is inelastic such as gasoline. A lower price is not going to make someone use uber. When I first got the app, I wanted to see the rate and as long as it was cheaper than a cab, I was happy. I am certainly not going to use uber more however because it is cheaper. If I need to get from point A to Point B, I will use it. The lower price will have no effect on me using it more nor do I believe it will increase new riders to any degree. Being cheaper than a cab, friendly, faster, more reliable are what matters, and probably not even in that order. I am surprised when I turn on my rider app, just how many available cars are nearby. What are these people thinking? I bet if the price went to .50 a mile, there would still be plenty of people willing to drive. It reaches a point where it just does not make sense. Even if they were right and you were driving more, the additional wear on your car, gas, risk of accidents and not to mention traffic citations (which I have gotten 2) in three months, my fault but would not have gotten them had I not been driving for uber, are all added costs that the current drivers do not see I guess. One citation will take away about a week's worth of uber wages at the current rates. Furthermore, I don't get why uber refers to drivers as a "partner". What kind of a partner has no say in how much they charge? A one sided partnership! Drivers are not partners, they are slaves to the company.


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## cybertec69 (Jul 23, 2014)

I just did 4 fares here is nyc for $40 gross, this is not sustainable, this is insane.


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## Casuale Haberdasher (Dec 7, 2014)

Miami1121 said:


> Uber claims to be doing this to increase demand, however people are willing to pay up to and maybe even more than a cab. Ask your riders, I did. This is about going after lyft and sidecar, nothing else at the expense of the driver. Rates will go back up, but who knows when. The lower prices are not all of a sudden going to get new people to download the app and use uber and they know this. It is just their excuse for the price cut. They claim the lower fares will mean more driving. Who the hell wants more driving to make the same money? I want to drive less and make more, not the other way around! They also want you to refer more drivers to make more $. Really? Just want I want, more drivers to compete with. Below is their canned response to a complaint made to them about the fare reduction:
> 
> Thanks so much for reaching out. We appreciate your feedback regarding this price change and wanted to provide a little more insight into a pricing structure that we believe will have a positive effect on your earning potential in these markets.
> 
> ...


POST # 1 / MIAMI1121: ... Thank you for posting
yet another "Orwellian" communication from
Kalanickistanian HQ. May I STRONGLY RECOM-
MEND reading George Orwell's "1984"... I am
sure that Travis has!


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## Mustang19 (Jan 5, 2015)

Lyft and Sidecar are not in Wilmington NC so why did they lower the rates? No one I drove since the rate cut would not have used Uber nor did I have anyone new due to the rate cut...it is pure crap to take 20% more from us while still having too many drivers sitting in this small and limited market.... Thank goodness I don't rely on this income as I would starve ....


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## painfreepc (Jul 17, 2014)

T.k. toll you on his blog, uber will replace the city bus


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