The sharing economy: Uber and its effect on taxi companies

Abstract

The popular ride sharing service Uber has undoubtedly affected the taxi industry by offering lower prices, faster and more quality service, as well as a higher degree of transparency in terms of choosing drivers and determining fares. A question arises inevitably: does Uber present loyal or unloyal price competition to taxi companies by offering signifcantly lower prices, cutting fxed costs and bypassing middlemen? Is there a tax loophole at play? The hypothesis this paper aims to examine is whether Uber is a new way of providing transportation services, thus bringing more transparency and fair competition to the industry, or it is a disruptor on a previously fair market. If the second case is correct, not all hope should be lost – perhaps with the right amount of regulation, Uber could become a new standard in service transportation. This paper is divided into three parts. The frst part briefly explores the concept of the sharing economy; a relatively new term and even newer foundation for business models of contemporary startups. Special signifcance is given to the reduced costs in companies which operate based on the sharing economy versus the so-called traditional companies. The second part of the paper examines Uber’s business model through costs, the pricing system, driver earnings and working conditions. Finally, the third part of the paper estimates the present and future impact of Uber on traditional taxi companies, taking into account its legal status, competition and the changing labor market.

Keywords

• Uber
• the sharing economy
• transportation
• competition
• taxi
• ride-sharing services