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Comment by t_mann | Hacker News Reader

Almost 10 years ago, Uber was hailed for creating consumer surplus [0] in similar studies:

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2837639

Discussed on HN: https://news.ycombinator.com/item?id=12478847

Who would have thought that they'd turn that research into algorithms that skim off surplus (from consumers and drivers)?

[0] Consumer surplus: roughly, the benefit of all those consumers who got a lower price than what they would have been willing to pay. Especially prevalent when there's one price for all. So the natural enemy of consumer surplus is price discrimination, where suppliers try to extract close to the maximum amount they're willing to pay from each consumer.

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I don't know, isn't the consumer surplus evidenced by people using the app?

I wouldn't think of just blindly hailing a cab anymore, especially in a city that's new to me. It doesn't have to be the lowest possible price, the experience just has to be consistent.

Log into the app. It already has my credentials and payment information stored. See the price, distance and time up front. Follow along the route while I'm driving. No money exchanged, no watching the meter or wondering if he's driving me around in circles. No fumbling for payment or pressure to tip.

That's the value.

In terms of price discrimination, they make more money on business travels or when it's crazy busy. The alternative is you can't get a cab. So I'm okay with it.

Their operating margin is about 10% which is reasonable for a business. The S&P 500 operating margin is 12.22%

And it's super easy to shop around. I always look at both Lyft and Uber and almost always go w/ Lyft as it usually has the lower price.

What are people complaining about exactly?

https://substack.com/home/post/p-163022654

https://www.gurufocus.com/economic_indicators/4226/sp-500-op...

You mean generally? Technology mystification. Taxis used to have price regulations and rules and the drivers were part of unions with health care benefits and pensions.

Now it's not-really-employees with magical floating prices and people accept it because "computer".

I recently hailed a taxi. When I got in the driver refused to turn on the meter instead quoting me a crazy price and then said his card reader didnt work. I cant say taxi's were much better pre-uber. The simple reason ride share took off is because taxi's have long been horrible.

Ironically it is often the socially concious union types that call Uber or Lyft.

Sure, in some regions there is what basically amounts to a taxi mafia. But aside from that Uber/Lyft offer the definition of a gig economy where people on both end believe to be winning. Depends on the country, but in most countries it isn't the price sensitive choice.

“In some regions”

Guatemala is the only place outside the US where I was not quoted 3-5x Uber prices by very pushy taxi drivers.

Taxi drivers are scam artists and thieves. There’s no reputational damage either, as you will never see them again.

Uber solves the reputation problem: every driver is rated, and poorly rated and badly behaved drivers do not get to work for them.

This stuff happens everywhere. Look at Trader Joes and Whole Foods. TJ has been owned by Aldi, one of the largest grocery corporations since the 1970s. It's non-union and is currently doing the mobbing thing that starbucks did in the 90s to squeeze out independent grocers. They're being bastards.

Still though, I shopped there last night.

I think the issue arises from them doing this on the supply side of the market as well. Discriminating offers to drivers in order to prioritise people willing to drive for less. Or just finding ways to pay people less through algorithmic means.

It's not like people were very happy about their "disruption" of the job market to begin with.

> Discriminating offers to drivers in order to prioritise people willing to drive for less.

Isn't this just describing a market? If I am trying to buy something (in this case a driver's services), I will first buy the cheapest?

Except that it's not a simple market because Uber/Lyft can charge a rider for a different rate than they pay the driver unless there's regulation prohibiting this.

You lack imagination. Two customers with the same itinerary might be quoted different prices not because of capacity constraints but because the platform has inferred that one customer is willing to pay more than the other... that's extracting consumer surplus and converting it to supplier surplus.

I guess I don't really care. I'm price sensitive, and I have options. So its pretty easy for them to pick up I'm price sensitive as I often check a route, check back 5 minutes later and ghost. So they can infer I'm going to a cheaper competitor.

There are some people that are loyal and don't mind paying slightly more. Or don't want the overhead of having multiple apps. Let them pay more.

This is essentially the same thing as coupons and sales. The people that take the effort to find and clip coupons and plan their shopping accordingly pay less. I don't bother so I pay more. I'm fine with this.

What is the bigger problem? Some democratic principle of everyone pays the same?

Again, Uber has 10% operating margins.

In that case we get your preferred route. People traveling these routes as well have a notoriously poor credit rating. See? We will make you pay either way.

Price discrimination is the foundation of business

While the Puritan culture that pervades America is usually derided, one thing they did and do have is issues with is price discrimination. The price is the price, doesn't matter if you're rich/poor/black/white/man/woman. So while that may be somewhat true, it's not universally so.

Non-productive businesses and rent-seekers perhaps.

More businesses than the authors can imagine work this way. They really ought to sit down and have a coffee with some salespeople.

It's fancy modern haggling... Where one party has almost infinitely more knowledge than the other, both about you and about every other person that might buy the good/service.

That imbalance is what people hate. It's part of why people hate car salesmen. And a large part of why people hate most salesmen.

That happens with airlines as well.

> I don't know, isn't the consumer surplus evidenced by people using the app?

You spend 10 years price dumping and being unprofitable to the tune of being 20 billion dollars in the red.

Customers are attracted by your price dumping because you offer cheaper rides than competition which has to deal with pesky insignificant things like labor laws, employees, inventory etc.

Did you create "customer surplus"?

> Who would have thought that they'd turn that research into algorithms that skim off surplus (from consumers and drivers)?

Literally any educated adult whos ever read Marx, Engels, or Paul Sweezy.

literally anyone whos ever turned the lens of historical materialism on capitalism.

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