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Agreed. The dominant strategy seems to be to undercut competitors until they are driven out of business, and then you can raise prices. However, raising prices

Agreed. The dominant strategy seems to be to undercut competitors until they are driven out of business, and then you can raise prices. However, raising prices then gives opportunity for a new ride-sharing service to come in and say that they can compete by offering lower prices for a period of time...

clairity 9y ago
yes, that's how capitalism is designed to work. the window in which you can make outsized profits is meant to be temporary so companies can't just rest on their laurels. it's beautiful when it works.
- emodendroket 9y ago
  That's not really how it's "supposed to" work. It's called predatory pricing and the most ardent free-market defenders claim it doesn't exist because it's economically irrational (check out the contentious discussion and Frankenstein-like text of the Wikipedia entry on the topic).
  - sol_remmy 9y ago
    "predatory pricing" So they're offering prices below cost and that is considered "predatory"? Last time I checked low prices are good for consumers
    - jfrankamp 9y ago
      In the long run, higher prices for consumers. After the predatory prices have driven out competition.
    - emodendroket 9y ago
      It's predatory because it is below cost and is just intended to preserve a monopoly on a market. The goal is to eliminate all competitors, then charge a price that a competitive market couldn't sustain. The harder it is for new competitors to enter your market the better it works.
  - mseebach 9y ago
    > most ardent free-market defenders claim it doesn't exist Yes, and the people on the other side of that debate are perfectly reasonable, dispassionate truth-seekers.
    - emodendroket 9y ago
      Do you feel I've unfairly presented someone's position? I don't agree with it but I think I have presented their case reasonably. Unless your objection was to my claim that they are "ardent defenders of the free market," but I think that is a reasonable characterization of the Adam Smith tie types.
      - mseebach 9y ago
        You've misrepresented the conflict as being one-sided, when it's not. There's a real difference of opinion and analysis, and plenty of "ardency" on both sides.
        emodendroket 9y ago
        On one side you have people who believe that predatory pricing is an issue and likely also that government regulation is needed to prevent it. On another you have people who believe that markets are so efficient that predatory pricing cannot happen. What do you think I'm missing here? Can you be any more specific than just vaguely saying I'm missing some nuance?
        mseebach 9y ago
        You only said half of that. That was what you were missing.
        emodendroket 9y ago
        I figured the reader could easily infer that there was a different group of people who did believe in predatory pricing.
- EpicEng 9y ago
  Capitalism is not "supposed to be" a race to the bottom and then the emergence of a single, monopolistic entity. That's far too simplistic. Price and value are a huge component of capitalism, yes, but the general idea isn't "price below what is sustainable by taking in massive amounts of funding until all of your competitors are sunk and then increase prices."
  - mseebach 9y ago
    There's nothing about this that will allow a single, monopolistic entity to emerge. There are probably hundreds of "Uber-ripoff" apps out there by now. Sure, as long as someone is willing to pour VC money into it and give people subsidized rides, sure, Uber can kill off contenders and stay dominant. But the second Uber starts raising prices to extract monopoly profits, someone else steps in and undercuts them. You can probably get started in a city for a few $100k, or even less if you have an existing operation of some sort you can leverage. The low-barrier-to-entry nature of this market is pretty much perfectly suited for market conditions to prevail and ride prices to stabilize quite near their costs.
    - emodendroket 9y ago
      That's essentially the argument NC has presented for why Uber is not sustainable.
      - mseebach 9y ago
        In that case they make very bad arguments, because such an equilibrium would be expected to be quite stable (although Uber might not be part of it).
        emodendroket 9y ago
        If Uber "is not part of the equilibrium" then that would suggest it wasn't sustainable.
        9y ago
- albertgoeswoof 9y ago
  So if you invest when a company is at the end of that temporary window, you’re going to lose money? Remind me of the difference between that an MLM scheme again?
- 111_1_111 9y ago
  Capitalism isn't designed. It's just the natural state of the world.
crdoconnor 9y ago
This is a strategy that has "worked" in transportation markets before. This is what the post-privatization 1980s bus wars were all about in the UK. A few companies won out, consolidation happened, unprofitable routes were dropped and prices rose on profitable routes to a level where bus riders could be more reliably tapped for profits - largely by monopolies and duopolies.

clairity 9y ago

yes, that's how capitalism is designed to work. the window in which you can make outsized profits is meant to be temporary so companies can't just rest on their laurels. it's beautiful when it works.

emodendroket 9y ago
That's not really how it's "supposed to" work. It's called predatory pricing and the most ardent free-market defenders claim it doesn't exist because it's economically irrational (check out the contentious discussion and Frankenstein-like text of the Wikipedia entry on the topic).
- sol_remmy 9y ago
  "predatory pricing" So they're offering prices below cost and that is considered "predatory"? Last time I checked low prices are good for consumers
  - jfrankamp 9y ago
    In the long run, higher prices for consumers. After the predatory prices have driven out competition.
  - emodendroket 9y ago
    It's predatory because it is below cost and is just intended to preserve a monopoly on a market. The goal is to eliminate all competitors, then charge a price that a competitive market couldn't sustain. The harder it is for new competitors to enter your market the better it works.
- mseebach 9y ago
  > most ardent free-market defenders claim it doesn't exist Yes, and the people on the other side of that debate are perfectly reasonable, dispassionate truth-seekers.
  - emodendroket 9y ago
    Do you feel I've unfairly presented someone's position? I don't agree with it but I think I have presented their case reasonably. Unless your objection was to my claim that they are "ardent defenders of the free market," but I think that is a reasonable characterization of the Adam Smith tie types.
    - mseebach 9y ago
      You've misrepresented the conflict as being one-sided, when it's not. There's a real difference of opinion and analysis, and plenty of "ardency" on both sides.
      - emodendroket 9y ago
        On one side you have people who believe that predatory pricing is an issue and likely also that government regulation is needed to prevent it. On another you have people who believe that markets are so efficient that predatory pricing cannot happen. What do you think I'm missing here? Can you be any more specific than just vaguely saying I'm missing some nuance?
        mseebach 9y ago
        You only said half of that. That was what you were missing.
        emodendroket 9y ago
        I figured the reader could easily infer that there was a different group of people who did believe in predatory pricing.
EpicEng 9y ago
Capitalism is not "supposed to be" a race to the bottom and then the emergence of a single, monopolistic entity. That's far too simplistic. Price and value are a huge component of capitalism, yes, but the general idea isn't "price below what is sustainable by taking in massive amounts of funding until all of your competitors are sunk and then increase prices."
- mseebach 9y ago
  There's nothing about this that will allow a single, monopolistic entity to emerge. There are probably hundreds of "Uber-ripoff" apps out there by now. Sure, as long as someone is willing to pour VC money into it and give people subsidized rides, sure, Uber can kill off contenders and stay dominant. But the second Uber starts raising prices to extract monopoly profits, someone else steps in and undercuts them. You can probably get started in a city for a few $100k, or even less if you have an existing operation of some sort you can leverage. The low-barrier-to-entry nature of this market is pretty much perfectly suited for market conditions to prevail and ride prices to stabilize quite near their costs.
  - emodendroket 9y ago
    That's essentially the argument NC has presented for why Uber is not sustainable.
    - mseebach 9y ago
      In that case they make very bad arguments, because such an equilibrium would be expected to be quite stable (although Uber might not be part of it).
      - emodendroket 9y ago
        If Uber "is not part of the equilibrium" then that would suggest it wasn't sustainable.
        9y ago
albertgoeswoof 9y ago
So if you invest when a company is at the end of that temporary window, you’re going to lose money? Remind me of the difference between that an MLM scheme again?
111_1_111 9y ago
Capitalism isn't designed. It's just the natural state of the world.

crdoconnor 9y ago

This is a strategy that has "worked" in transportation markets before. This is what the post-privatization 1980s bus wars were all about in the UK. A few companies won out, consolidation happened, unprofitable routes were dropped and prices rose on profitable routes to a level where bus riders could be more reliably tapped for profits - largely by monopolies and duopolies.