[dpatru]

Productivity in any market requires investment. Here Uber needs to build a network of drivers and passengers, so they spend money subsidizing rides until the network grows to a sustainable size. How is this different than what any other competitor does? For example, bus transport companies need to buy buses and arrange routes before they can take passengers. Manufacturing companies need to design products and build factories before they can produce. Skilled workers need to go to school and practice before they can be hired as skilled workers. Etc. The exact nature of investment varies, but the general idea that competing effectively requires upfront investment is the same. Investment is not unfair; it is how productivity rises and civilization progresses.

> There's a fixed supply of willing drivers ...

The supply of willing drivers varies by wages. Also the supply of willing passengers varies by prices. Uber's success depends on being able to entice drivers with higher wages and passengers with lower prices. To the extent that they are successful, they make both groups better off.

> Unlike with cloud services (the other example) it's much harder for competition to Uber to reappear once it's disappeared. There's a fixed supply of willing drivers and big network effects at play.

This is exactly backwards. Once a large network of drivers and passengers connected by smartphones has been established, a competitor has only to offer its own smartphone app to compete. The hard part is building the network and changing people's behaviors.

[dhimes]

GP's not talking about investing in infrastructure or training. GP's talking about selling the product for less than it costs to produce in order to have a monopoly in the region. This not only discourages the competition, it discourages the existence of competition.

Back in "the day," VCs (at least some) would tell you directly that they wouldn't invest in anything that competes with Microsoft. The legality of it all was irrelevant to the conversation- they weren't going to enter the fight.

[dpatru]

Uber's network of drivers is way of providing transportation services. This network doesn't just spring into existence. It must be created and it costs money. A traditional bus service also costs money; the buses must be purchased, the drivers hired and paid, the routes established and signs posted, etc. Why isn't a bus company unfairly competing with taxis by offering lower fares based on massive upfront investments in bigger vehicles that are paid back over many years? Uber's "bus" is its network.

> monopoly in the region

There is no monopoly in transportation. People can drive their own cars, take buses, take taxies, ride Lyft, walk, bike, etc. Uber is creating a network.

> This not only discourages the competition, it discourages the existence of competition.

Discouraging competition is the same as discouraging the existence of competition.

To compete effectively against any good business requires investment. Uber is competing against the taxi network, bus services, zipcar, etc. Uber's strategy requires investment in building a network of drivers that can quickly reach anyone in the service area. To build this network, they have to invest in drivers and passengers. They do this by paying drivers more than they produce and offering passengers service for less than it costs. As more drivers and passengers join the network, costs come down, service gets better, prices may be able to be raised, and Uber may be able to recoup its investment and earn a profit. Maybe. if they earn too much of a profit by charging passengers too much or paying drivers too little, they risk being replaced by other app makers who offer Uber's network of drivers and passengers a better deal.

It's uncertain if Uber will be profitable. But in trying to be profitable, Uber is definitely offering drivers and passengers better options than what they already have (otherwise, the drivers and passengers would not be using Uber).

[dhimes]

Uber's network of drivers is way of providing transportation services.

They provide a particular type of transportation services, just like the cable company provides a particular type of information service. The cable company can have a monopoly even though you can still read a newspaper for information.

I understand what they are doing, i.e., their strategy. That's not the question. The question is whether or not it is or it should be legal. I honestly don't know the answer to this but there is absolutely no question they are using their size to smash their competition. They could use an alternative strategy, like the rest of us do, such as start with a smaller size and grow demand 'organically' by having a better experience than the bus, taxi, and lyft. But they have a lot of financial muscle and they are using it, for better or worse, to demolish the competition that is in place and intimidate those who are considering it. My guess is that it'll be pretty effective if they can pull it off.