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Friday, February 17, 2017

Strategic CSR - Uber

The article in the url below raises an interesting question:
"What if Uber kills off public transport instead of cars?"
While this may not be a very pressing concern in most U.S. cities, where public transport is generally less well-developed; in Europe, public transport is central to most city life:
"The perceived wisdom is that Uber has disrupted taxis and that private automobiles are next, but what if we've misread what is happening in our cities? Traditional thinking would suggest that UberPool, which allows users to split the cost of trips with other Uber riders heading in the same direction, will always be inferior to public transport. Sitting in the backseat of a Prius may be more comfortable than standing on a crowded bus or train, continues this reasoning, but carpooling can't substitute for mass transit at rush hours without massively increasing congestion."
Rather than simply offering an alternative method of transportation for those who can afford it, the aggressive pricing on Uber Pool appears aimed directly at public transportation – seemingly with the goal of eventually replacing it:
"This is wrong. In the last six months, Uber has begun offering shared rides for as little as $1 (81p), introduced optimised pickup points that algorithmically recreate bus stops, and started testing semi-autonomous vehicles it hopes will solve its increasingly contentious labour issues."
A standard economic answer to this problem would be that Uber will only succeed in replacing public transportation if it ultimately adds more value than buses and trains. If it is cheaper (shared costs), more comfortable (no standing), and more convenient (picks you up at your house), then it may indeed add more value. The danger, I guess, is if Uber follows the pattern it has demonstrated with its drivers (see Strategic CSR – Gig economy and also here), where it offers financial incentives to sign-up, but then decreases those benefits slowly over time. The equivalent with public transportation is if it is initially much cheaper to use Uber, but becomes more expensive once government has cut the relevant funding.
Have a good weekend
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What if Uber kills off public transport rather than cars?
By Greg Lindsay
January 13, 2017
The Guardian