Why the taxi industry is in Uber trouble

Why Uber is in the driver's seat

App-driven ride-sharing services such as Uber and Lyft are more efficient than the taxis with which they compete, says a new study.

The study, by Judd Cramer and noted labour economist Alan Krueger, is Disruptive Change in the Taxi Business: the Case of Uber. It says that in most cities for which data is available, UberX drivers use their carrying capacity better than taxis do.

That is, they have a passenger in their car much more often than do taxi drivers, whether you count time or distance travelled.

Why are ride-sharing services more efficient? The authors suggest four factors that matter:

  • Ride-sharing services have more efficient technology for matching drivers with passengers. The authors note that the taxi industry’s technology was developed in the 1940s.
  • Ride-sharing services are bigger than taxi companies, and in this industry, that matters.
  • Taxi regulations are inefficient. For instance, taxis are often prohibited from picking up passengers outside the jurisdiction that issued their licence. 
  • Because they use a flexible labour supply and change their prices depending on supply and demand, ride-sharing services match supply and demand better throughout the day.

Read next: The Uber question you probably never asked

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June 2016
June 2016

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