[Vraxx]

I'm not so sure I agree. If you crank up the prices, a lot of users who are users because of those prices will just stop being users. You don't exactly have a good way to lock users into it, so this strategy doesn't seem as effective. I imagine that the most locked in user will be one that sold their car to solely ride uber, and they can just go get a car if the the cost analysis tips more in favor of the car. "Worst" case for this user is they need to buy a vehicle, slighly better but still bad case, they pay more, but less than owning a vehicle but still reaped years of low low prices.

[niftich]

As you say, there is no effective way for them to lock users in, but they don't need to. They can outspend and outlast Lyft to make them run out of cash and/or devalued to the point where they can acquire them and shut them down.

At that point, any (future) new entrant to the market will face a steeper uphill battle than Lyft did. In the process, they may lose some customers to real cars or public transit, but they'll remain the only player in this space.

[ethanbond]

No they won't face a steeper uphill battle. They'll have a much easier time: legislation will be clearer, drivers will already be driving for uber so installing another app is trivial, riders will already be familiar with app-hailed rides and so installing another app is trivial.

[niftich]

These are good points, but at the end of the day, a provider is going to have to pay out to drivers (and collect fares). Uber will be difficult to compete with on price for the exact same reasons that Walmart and Amazon are difficult to undercut consistently.

[toomuchtodo]

I wonder if this holds true once it's determined Uber drivers are employees and not contractors. That bill will be quite the bite.

[hkmurakami]

Those users who were only in it for the cheap fares would have left anyways in a world where Lyft survives but fares increase to profitable levels.

If Uber succeeds in killing Lyft, they can dictate pricing more effectively and harvest a surplus from the remaining consumers.

[ethanbond]

Okay and then one of the 13 other startups doing this suddenly become able to undercut Uber because they have VCs who are willing to gouge the actual balance sheet in order to put Uber out of business.

Crucially, Uber doesn't own the cars nor the drivers. Anyone willing to throw more cash to drivers and take less cash from riders (with the infusion of VC funding) can instantly steal both the supply and the demand from Uber.

[foobarqux]

Why would Uber let a competitor undercut them?

[ethanbond]

Because they have a finite pile of VC cash to burn through.

[foobarqux]

But one larger than the new entrant.