[lpolovets]

The problem is that Uber/Lyft make it so that they are cheaper AND faster than a new entrant. I think if a 3rd company came along and it paid drivers better, then drivers would install a 3rd app. But Uber/Lyft's network effects makes that a very expensive proposition. For example, if an Uber driver gets $5/ride and can do 6 rides/hour, they make $30/hour. If a new entrant can only offer 4 rides/driver/hour (at $5/each) because there aren't enough riders using its app yet, then either the riders or the new entrant have to subsidize drivers the additional $10/hour. Riders won't pay extra -- why would they when they can use Uber instead? -- so the new entrant ends up paying 1/3 of each ride to get the network effect going, and that can be quite expensive if you're doing thousands of rides per day in a single city.

There are some complications to consider. Maybe a 3rd company can pay drivers a little less because it treats them more nicely than Uber does, or maybe riders will be willing to pay more or wait more for a 3rd company's cars for some reason (e.g. Lyft's tends to be friendlier while Uber is more formal, and some users are willing to pay more for the former). But in general the more passengers and drivers an app has, the better off both sides of that app's market will be.