Question

Uber began to trade its stock publicly in early May of 2019. The initial stock price was a bit of a disappointment. Uber had hoped investors would value it at around $100 billion, but they instead valued it Iat closer to $80 billion dollars. One of the reasons that investors may have been wary of Uber could because of friction between the company and some of its drivers.

An interesting podcast on the issue:

https://podcasts.google.com/?feed=aHR0cHM6Ly9yc3MuYXJ0MTkuY29tL3RvZGF5LWV4cGxhaW5lZA%3D%3D&episode=Z2lkOi8vYXJ0MTktZXBpc29kZS1sb2NhdG9yL1YwLzNPTDZPc0luVHNpTzZ3cmNmVll6MFNrcTNRQjRxTVNBNjhFUHAtUThIZm8%3D

After listening to the podcast, think about:

1. What are drivers' biggest complaints against Uber?
2. Do you think Uber is likely to "give-in" to the demands of its drivers? Why or why not?
3. Do you think Uber operates in a competitive market? Why or why not?

Feel free to use other sources as well in your response.

Answer 1

The driver's biggest complaints can be summed up as follows:

1. The basic pay that the Uber drivers get is a lot less than their work hours making it difficult for them to sustain their livelihoods. The company's share of profit is alot more than they get which is also a problematic situation on the part of the drivers. Their payment has been reduced by the heavy subsidies and discounts by the competitors

2. The other benefits such as healthcare facilities are also not available worsening the situation of these drivers. In addition to this, some of the cities are getting lower pay than other cities too which is also a complaint from their aspect.

3. The transparency of the payment structure has also been an important thing which the workers have wanted to know since they dont get the full information which they should be entitled to as a basic right.

The company might not give in easily to all the demands but can gradually meet the expectations of the drivers too by setting up some performance standards such as by ensuring better facilities to the riders and making it a safer ride. The sustainable comparative advantage can only be achieved when the company satisfies both the riders and the drivers by ensuring better facilities with safer rides and better payments to the drivers as well. The company should focus on getting above the labels of the scandalous events of Uber drivers too.

The Uber company does operate in a competitive market due to which rivalries offer the customers a lower price for the same rides and are able to grab a large segment of the customers. However the network effects and the brand name determine the competitiveness of the company in the market. Thus if Uber is able to build up stronger network effects and at the same time charge reasonable prices to the riders then it could differentiate its services in a way. In that case it would become a monopolistic competitive market.