Managerial Econ

July 19, 2017
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Managerial Econ

Bloomberg has a nice article on how London cabbies have changed their stance to ridesharing. Many taxicabs and municipalities have responded to the entry of Uber with a hard stance including protectionist measures and sometimes violence. Now they seem to be accommodating and imitating this entry.

After resisting everything Uber, the cabbie told me that he and his colleagues are shifting to a more constructive response — they are adapting. For example, he is part of a syndicate that now uses an app similar to Uber’s to provide riders with an expanded menu to hail and pay taxis, as well as offer them more control and transparency. The sector is a lot more willing and able to accept credit card payments. And it is all part of an effort to improve customer relations.

In a moment of frankness, he admitted that Uber has delivered a much-needed wake-up call. For him, it is no longer about stopping Uber; nor is it just about co-existence. A growing number of traditional taxis cabs are also embracing some of their rival’s best practices.

Part of this change is the realization that ride-sharing represents both a competitive threat and a more efficient ‘production’ technology.

The initial phases of Uber’s technology-led “disruptive innovation” proved particularly powerful because they lowered in a remarkable way the barriers of entry to both the supply of urban transportation services and the demand. Few disruptions influence both sides in such a dramatic and lasting fashion. 

By allowing massively underused assets — personal vehicles otherwise sitting idle — to double as taxis, Uber significantly increased the provision of the service. And by measuring client satisfaction in a timely and high-frequency manner, it ensured that the bulk of this additional service would be clean, responsive, accountable, efficient, cost-effective and friendly. 

The revolution on the demand side came from Uber’s understanding — and use — of the power of mobility, big data, and artificial intelligence. In doing so, it met the growing digitalization desires of clients (initially, mostly millennials, but increasingly encompassing a larger part of the population) eager to gain greater direct control over activities that had become ill-served, increasingly distanced and, in some cases, alienating. By also making the payments and settlement process more efficient and transparent, Uber further improved the experience for riders — leading many to substitute the service not just for other forms of public transportation, but also for private cars.

(Why?)

Fri, 14 Jul 2017 14:50:00 +0000Michael Wardentext/htmlhttps://managerialecon.blogspot.com/2017/07/what-is-appropriate-strategic-response.html15. Strategic gamesHow many ways can you price discriminate?http://managerialecon.blogspot.com/2017/07/how-many-ways-can-you-price-discriminate.html</link>
http://managerialecon.blogspot.com/2017/07/how-many-ways-can-you-price-discriminate.htmlAlso in my travels, I got to got to Heidelberg and rode the funicular up to the schloss. Their pricing schedule demonstrates multiple ways in which they price discriminate.

  1. The additional charge for the return down the hill (3 Euro = 12 Euro – 9 Euro) is much less than the  single ride up the hill (9 Euro). Since the stroll down the hill is a closer substitute than the climb up, demand is more elastic coming down.
  2. The “concession” is a catch-all phrase for the elderly, students, and maybe a few others. These folks tend to be poorer and more elastic and so get a discount.
  3. They charge lower average prices for groups of preschool children. This is a form of bundling.
  4. They charge lower average prices for large groups and the rates fall as group size increases. This is more bundling with larger groups being more elastic.
  5. Finally, families get increasingly larger discounts on ever more children. That is, there are quantity discounts on kids.
  6. Did I miss any other dimensions?

(Why?)

Wed, 12 Jul 2017 19:13:00 +0000Michael Wardentext/htmlhttps://managerialecon.blogspot.com/2017/07/how-many-ways-can-you-price-discriminate.html13. Direct price discrimination14. Indirect price discrimination

(Why?)

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