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Comment by Traster | Hacker News Reader

Capital. Assuming the article is right and there's no fundamental efficiency saving of any particular taxi company then to challenge Uber's monopoly in a market you need to sink money into subsidizing fares until you drive Uber out of the market to establish your own monopoly. Why would someone do that? It's far more effective for Lyft to put it's capital into where it can establish itself rather than just having a cash burn contest.

This is why Uber left South-East Asia to Grab in exchange for a stake.

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> sink money into subsidizing fares

This assumes there is no way to undercut Uber's costs. If Uber wants to be a 100 billion dollar company then someone could be happy with being a 100 million dollar company and aim for a much smaller market.

They don't need to win every city, just take a slice of the most profitable city from Uber. Suddenly your 10 million per year profit is costing Uber 10 times that as they can't undercut you and still be highly profitable.

After that either the small guy expands, or someone else aims for the 2nd most profitable city. Eventually, Uber is left with a monopoly on the least valuable markets and steady competition on all the profitable ones.

And that's assuming they can kill off Lyft, and all other significant players which already have network effects and cash on hand.

>They don't need to win every city, just take a slice of the most profitable city from Uber. Suddenly your 10 million per year profit is costing Uber 10 times that as they can't undercut you and still be highly profitable.

If Uber is operating in 100 cities and you turn up in their most profitable one, they can just drop the prices and make a loss in that city until you leave.

I agree with you, maybe they don't kill off lyft and don't get to the point that they have the scale to implement their strategy, but that doesn't stop it being a decent strategy to aim for.

> If Uber is operating in 100 cities and you turn up in their most profitable one, they can just drop the prices and make a loss in that city until you leave.

That gets insanely expensive in their most profitable city as you not only forgo profit you also need to drop the pice enough that people pick you. And it’s never going to be just one company in just one city that tries to compete. The might be able to pull it off, but not while being a 100 Billion dollar company.

Remeber, long term their options are be profitable or fail. They can’t continue to attract money if they had a monopoly and still can’t be profitable.

You don't have to establish a monopoly though - your simple presence in the market (relatively low cost since it's not like drivers are loyal to a particular brand) will give you a cut of the profits that would otherwise go to Uber - why forfeit an entire market when you can participate at low cost?

And require Uber to continue subsidizing fares in that market. If you assume Uber operates at a loss everywhere they subsidize then smart competition will compete everywhere.

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