What Are The Ethical Challenges That Uber Faces In Using App-based Peer-to-peer Sharing Technology
The sharing economy: Uber and its effect on taxi companies
Abstract and Figures
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.
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123
ACTA ECONOMICA
Volume XVI, No. 28 / June 2018
ISSN 1512-858X, eISSN 2232738X
SCIENTIFIC CRITIQUE, I.E. POLEMIC OR REVIEW
UDC: 30.101.5:005.311.6
DOI: 10.7251/ACE1828123P
Lana Pepić1
e sharing economy: Uber and its eect on taxi companies
Економија дијељења: Убер и његов утицај на такси компаније
Abstract
e popular ride sharing service Uber has undoubtedly aected the taxi
industry by oering lower prices, faster and more quality service, as well as
a higher degree of transparency in terms of choosing drivers and determin-
ing fares. A question arises inevitably: does Uber present loyal or unloyal
price competition to taxi companies by oering signicantly lower prices,
cutting xed costs and bypassing middlemen? Is there a tax loophole at
play? e 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.
is paper is divided into three parts. e rst part briey explores the
concept of the sharing economy; a relatively new term and even newer
foundation for business models of contemporary startups. Special signi-
cance is given to the reduced costs in companies which operate based on
the sharing economy versus the so-called traditional companies. e sec-
ond part of the paper examines Uber's business model through costs, the
1 A student of the rst cycle of studies at the Faculty of Economics University of Banja Luka,
e-mail: lana.pepic@gmail.com
124
Lana Pepić e sharing economy: Uber and its eect on taxi companies
pricing system, driver earnings and working conditions. Finally, the third
part of the paper estimates the present and future impact of Uber on tradi-
tional taxi companies, taking into account its legal status, competition and
the changing labor market.
Key words: Uber, the sharing economy, transportation, competition, taxi,
ride-sharing services.
Introduction
With the advent of the Internet in the 1990s, its accelerated development in the
early 2000s, and the recession beginning in 2007, new forms of businesses began
to develop. "Information and communications technologies (ICTs) have enabled
the rise of so-called 'collaborative consumption': the peer-to-peer based activity of
obtaining, giving, or sharing access to goods and services, coordinated through com-
munity-based online services" (Hamari, Sjöklint, Ukkonen, 2015). Collaborative
consumption, more widely known as the sharing economy, is important because
it cuts costs of coordination among members of an organization, and when talk-
ing about taxi services, it cuts costs of middlemen needed to bring consumers
and drivers together. Since its ocial launch in 2011, Uber has spread to more
than 630 cities around the world, and provided over one billion rides as of 2015.
Not long aer Uber began oering its services across the United States, taxi com-
panies began to realize the possible consequences of a new, cheaper and faster
transportation service. e entire traditional taxi industry could be in a serious
danger of a new, unmatched competitor. A deeper look into Uber's price policy,
also known as the dynamic pricing system, revealed that Uber oers much lower
fares than taxis most of the time. It could be argued, then, that traditional taxi
companies could protect their market share merely by nding a way to oer more
competitive pricing. However, further research in this paper shows that competi-
tive prices are only one factor that contributes to Uber's success over taxi compa-
nies. Other things, such as speed and the quality of service, as well as availability,
are more dicult to replicate and those give an even bigger competitive edge to
Uber.
e problem of possible tax evasion, although not illegal tax evasion because
it only takes advantage of legal loopholes, gives Uber's critics the upper hand.
eir stance is that Uber is capable of oering lower prices because it doesn't pay
as much tax as the local taxi companies do. Indeed, a complex tax scheme exists
and it is set up outside the United States. Supported by two daughter companies
located in the Netherlands and in Bermuda, the tax scheme ensures that Uber
pays a minimal amount of tax. e issue of legal tax evasion is far too complex to
125
Acta Economica, Volume XVI, No. 28 / June 2018 123 – 136
be explored more deeply in this paper, especially taking into account that many
leading global companies also use the same technique to reduce their tax burden.
e question remains whether it is better for these companies to continue paying
minimal tax, reducing their costs in favor of greater eciency and productivity,
which might lead to greater employment and prots, or the companies which
engage in such practices should be obliged to pay tax in the countries where they
operate.
To determine the exact price dierence between Uber and traditional taxis,
a simple model is shown to compare taxi and Uber prices in the city of Zagreb,
Croatia, where Uber has been operating since 2015. ree taxi companies are
compared to Uber, taking into account the particularities of Uber's pricing sys-
tem: dynamic pricing and a fare that depends not only on the distance, but also
on the time needed to reach the destination, as opposed to taxi fares which only
depend on the distance between the starting point and the end point.
Next, the eect of Uber on the job market is examined, based on statistical
data and economic research in the United States. e questions answered in this
section are the following: does Uber aect the unemployment rate among taxi
drivers in a given city, and if so, in what way? Are there any changes in salaries?
What are the possible long-term market outcomes in a given city aer Uber is
introduced? Finally, competition is analyzed as the most controversial element
of Uber's market presence. It is argued that, although adequate regulation is still
missing, Uber represents a healthy competitor needed in the industry which
hasn't changed for many decades. As every novel idea, transportation services
developed on the base of collaborative consumption are going to take some time
to become accepted by everyone, and taxis may or may not come out as winners,
but they denitely need to change their business models, especially with the digi-
tal age being taken into account.
1. e sharing economy
It is not exactly known when the term "Sharing Economy" rst came to use, al-
though most authors ascribe it to Benkler in his paper Commons-based peer pro-
duction (Benkler, 2002). is concept of "peer production" implies coordinated
cooperation among many individuals facilitated through the usage of the Inter-
net and other shared resources. Another diering characteristic of this type of
production as opposed to traditional organizations is a relatively attened hierar-
chy among organization (community) members. However, commons-based peer
production is not a synonym for the sharing economy, a term fully developed in
the wake of the recession in 2008. Following a global recession and a growing
unemployment rate, many individuals resorted to utilizing the only remaining
126
Lana Pepić e sharing economy: Uber and its eect on taxi companies
resources they had besides their skills. Goods and services that were expensive
to obtain, but were sought aer on the market, began to be oered for (usually
short-term) rent on the Internet. An obvious example is AirBnB: instead of pay-
ing for an expensive hotel, or even buying real estate, customers now had an on-
line platform where they could rent apartments, rooms or houses under exible
conditions. Signicant costs that usually appear in the hospitality industry, such
as marketing and supporting sta, are eliminated and the price is much lower.
Besides that, another important aspect of the sharing economy attracted
many users: a time-saving online "booking" system which quickly satises sup-
ply and demand. In industries which employ traditional business models, such
as mainstream hotel and taxi companies, those who seek and those who supply
the service or product usually need to coordinate their requirements in terms of
time, price, availability and administrative processing. Companies based on the
sharing economy rely heavily on online systems where customer needs are met
very quickly and prices are usually agreed upon at the time of reservation.
In addition, most companies based on the sharing economy, among them also
Uber, employ an online rating system for their employees as well as for custom-
ers. Since most of the communication between the customers and companies is
online, it's very simple to implement a rating system where customers are encour-
aged to leave their rating aer receiving their product or service. Companies then
nd it easy to analyze feedback and quickly improve their weaknesses and capi-
talize on their strengths. Traditional hotels, for example, had books of impres-
sions (guestbooks) but those were not used by the majority of customers. Today,
however, traditional hotels also have online rating systems where customers can
rate the service they received. On the other hand, the situation with traditional
taxi companies is dierent. Customers view their experience as a one-time event,
and usually do not bother to go online and leave feedback. However, Uber users
are more willing to leave ratings because they do not consider their experience
as a one-time event, and want to see the service improve over time. Uber also
employs a rating system which works the other way around: in order to protect
its drivers, they are also encouraged to rate passengers. If a passenger has a bad
rating, he or she might have a hard time getting a ride, or even might be com-
pletely excluded from Uber's services. is two-way rating system promises, at
least in theory, a mutual respect between drivers and passengers and assures both
driver and passenger that most rides will be safe and enjoyable. It is dicult for
traditional taxi companies to make this kind of a guarantee, and passengers and
drivers are usually in the hands of coincidence when it comes to the riding expe-
rience with typical taxis.
e downside of a company based on the sharing economy is the existence
of a much lower barrier of entry for new employees. is is because fewer re-
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Acta Economica, Volume XVI, No. 28 / June 2018 123 – 136
sources are mobilized to do new employee screenings, and because of high de-
mand for the company's services, many potential employees are accepted if they
satisfy only the minimum criteria. is might mean that passengers don't oen
feel secure knowing that it is not required to pass a professional exam of any sort
in order to become an Uber driver.
Even further, a decentralized model of doing business inevitably results in a
slower response to customer complaints. Because of a high volume in requested
and nished rides (Uber) or requested and booked accommodation (AirBnB),
very large investments in human resources would be needed to provide adequate
and timely customer support.
Taking into account the positive as well as the negative properties of compa-
nies based on the sharing economy, it is evident that a strong demand for their
services exists. Since these companies are not going anywhere anytime soon, we
are forced to examine the eect of their presence on the traditional markets in
given industries. Competitive pricing, mass employment with exible working
conditions and a real possibility of a future monopoly are factors that need to be
explored in the following sections.
2. Uber's business model
As already noted, Uber is a service similar to a taxi service, founded on the idea of
the sharing economy, or collaborative consumption. Headquartered in the Unit-
ed States of America, it operates in 82 countries around the world, including the
USA (data from Q1 2018). Figure 1 shows a world map with orange areas which
represent countries where Uber is currently present. Uber has some fundamental
dierences that set it apart from classical taxi companies, although they are start-
ing to oer services similar to Uber.
e rst dierence is the dynamic pricing system, powered by computer al-
gorithms which work with user data collected from Uber's mobile app. In times
of a surge in demand, for example on a Saturday night or a rainy day, there is an
excess of demand. Consequently, there is a lack in the supply of available vehicles.
Based on the number of users who open the app (but not necessarily ask for a
ride), Uber's algorithm calculates a percentage price surge which causes a lower
demand and a higher supply. In that way, a certain portion of users decides not to
ask for a ride because the price surge makes it too expensive, and a certain por-
tion of drivers decides to make themselves available for a ride because the price
surge is high enough. A price surge that doubles the fare is expressed as 2x, a 20%
price surge is noted as 1.2x, and so on. Further analysis shows that, even with a
certain price surge, an Uber ride is cheaper than a taxi ride.
128
Lana Pepić e sharing economy: Uber and its eect on taxi companies
Figure 1.
Uber's presence around the world
Source: http://ride.guru
Taxis usually oer only one type of vehicles in standard colors and car models.
Uber, on the other hand, has many dierent forms of service. UberX is the most
widely used type of service because it is the cheapest. It features a classic sedan
with no color preferences available. Other services include Uber Eats, a coopera-
tion between Uber and local restaurants for food delivery, UberBOAT for cities
with maritime trac, Uber services that oer luxury black cars, and many, many
more. To a customer looking for a specic type of service, Uber oers many con-
venient options.
e quality of service is incrementally improved by employing a two-way
rating system, where customers rate drivers aer nished ride, and vice versa.
Customers also have a real-time insight in the vehicle's location as it's approach-
ing them, so they know when and where exactly they can expect it. All of these
features make Uber an objectively better transportation service than taxis. Other
factors, such as speed of service, familiarity with the app, and the in-app payment
system also make it a more competitive option than taxis.
Uber's international expansion strengthens its market power. People who use
Uber in their home country can expect to receive similar service in any other
country they visit which Uber covers. is type of universal service has been
proven to retain a large percentage of customers, similar to a chain of hotels
which look exactly alike and oer identical service worldwide.
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Acta Economica, Volume XVI, No. 28 / June 2018 123 – 136
2.1. Uber's pricing system
Since Croatia is the only country in the Western Balkans where Uber operates
without many restrictions, Uber's pricing system for UberX will be compared to
three Croatian taxi companies in the city of Zagreb – Radio Taxi, Eko Taxi and
Cammeo Taxi.
Table 1.
Fare comparison between Uber, Radio Taxi, Eko Taxi and Cammeo Taxi.
Uber (1) Radio Taxi (2) Eko Taxi (3) Cammeo Taxi (4)
Starng fare[HRK]
HRK/km
HRK/min
Source: uber.com, http://radiotaxizagreb.com/hr/, http://www.ekotaxi.hr/, https://cammeo.hr/hr/
gradovi/zagreb
Table 1 shows three elements present in the price equation of a typical taxi
company: a starting price which is xed and does not change during the ride, a
fare expressed in Croatian Kuna (HRK) dependent on the distance travelled in
kilometers (km), and a fare dependent on the time it took to reach the destina-
tion in minutes. Note that only Uber employs the third fare element, whereas the
traditional taxi companies in Zagreb only charge a xed starting fare combined
with a fare charged by the kilometer.
e prices of these four transportation services could be represented by the
following functions:
fu (x)=6+3d+0,4t (1)
fr (x)=10+6d+0t (2)
fe (x)=8,8+6d+0t (3)
fc (x)=6+6d+0t (4)
Mathematically, as well as from the table itself, we notice that Radio Taxi, Eko
Taxi and Cammeo Taxi have equal fares per kilometer. e only dierence in
their price functions is the xed factor, or the starting price. erefore, to further
simplify the analysis, we can disregard Radio Taxi and Eko Taxi since they are
both inherently more expensive than Cammeo Taxi and Uber.
To have an approximate estimate of the price of an average city ride in Zagreb,
the average velocity of the vehicle driving through Zagreb needs to be factored in,
because of Uber's time-depended fare element. Aer some thought, the speed of
25 km/h is taken as the average speed, and the analysis was done for distances up
to 20 kilometers. e results of the analysis are shown in Table 2.
130
Lana Pepić e sharing economy: Uber and its eect on taxi companies
Table 2.
Comparative analysis of a typical ride of 1-20km in Zagreb.
Distance Time Cammeo Uber
d [km] t [min] Ride price
in HRK
Ride price
in HRK Taxi/Uber
Source: Author's analysis, http://businessinsider.com
To see if the analysis is correct, the results of Uber's ride prices were compared
to the estimates on the Uber's website for UberX in Croatia. Factoring in a pos-
sible (slight) price surge, uber.com estimates a ride in Zagreb to amount to 35-46
HRK for a 7,5 kilometer ride. e calculation from Table 2 estimates the price of
that ride (25 km/h, no price surge) to be 35,70 HRK. erefore, Table 2 can be
taken as an approximate guide for comparing the price of Uber and other taxi
companies.
e column "Taxi/Uber" shows how much in percentages a taxi ride is more
expensive relative to Uber ride for the given distance. A ratio of 1.29 means that
Uber ride will be cheaper than Cammeo Taxi ride until the price surge surpasses
1.29x. Note that Uber has a minimum ride price of 10 HRK, which only changes
the rst row to 10 instead of 9.96 HRK.
e analysis clearly shows that UberX is cheaper than taxis in the city of Za-
greb, even with signicant price surges. Taking into account that sometimes less
time will be needed to reach the destination and that the quality of service is
assumed to be better in UberX, customers have strong reasons to choose UberX
over local taxis.
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Acta Economica, Volume XVI, No. 28 / June 2018 123 – 136
2.2. Driver earnings and working conditions
Data from Croatia show that the average Uber driver can earn up to 5000 HRK
per month and even 10000 HRK per month, which makes these earnings com-
parable with the average Croatian monthly wage of around 8000 HRK before tax
(Croatian Bureau of Statistics, 2017). Uber drivers are paid per ride, and 20-25%
of the ride earnings go directly to Uber, and the driver is le with 75-80% of the
fee, for which he pays tax.
ere is a low barrier of entry for new Uber drivers in Croatia: a valid driver's
permit older than a year is needed, along with attending a short online course cre-
ated by Uber. Uber Croatia, a division of Uber, has a wide network of employees
responsible for handling potential drivers who streamline the hiring process and
help with any legal issues. Flexible working hours, a low barrier of entry and the
possibility to use one's own vehicle for the job makes Uber an attractive employer,
especially for young adults. Many cases of professional taxi drivers switching to
Uber have been noticed, as well as taxi drivers who work both for Uber and a taxi
company. A big dierence between taxis and Uber is that Uber drivers are treated
as independent contractors and because of that, they cannot exercise their rights
as usual workers can. Paid sick leave, health benets, minimum wage and other
rights do not apply to them. is causes some concern around Uber and similar
services, and is currently a subject of discussion, at least in the United States.
Despite the data on the large earnings of Croatian Uber drivers, the reality
might be dierent, especially as time goes by. Since drivers earn per ride, and
their earnings depend on the demand (for example, that day) as well as on the
time and distance needed for a ride, it is logical to conclude the following:
1) As Uber's popularity rises, and as more people start working for it, fewer and
fewer drivers will have many customers daily, which means their daily wage
will reduce over time,
2) Drivers in smaller cities, and those with a lower frequency of trac will also
earn less because of the time- and distance-dependent fare.
On the other hand, there could be a market equillibrium eect here, since
fewer drivers will work for Uber when they hear that earnings are stagnating, and
competitors such as Ly are also taking a piece of the workforce.
3. Uber's impact on taxi companies
3.1. Legal status and tax
A complicating factor in studying the case of Uber is that it now operates in so
many countries around the world, and each of these countries has its own dis-
tinct legal system. Uber has so far argued that, legally, it shouldn't be registered
132
Lana Pepić e sharing economy: Uber and its eect on taxi companies
as a taxi company, but as an IT company, or even a service (intermediary) for
connecting clients and drivers. According to data from Q1 2018, Uber Croatia is
registered as a rent-a-car service, which means that Uber drivers in Croatia don't
need a taxi driver's license to work for Uber. at is a controversial topic in the
Croatian traditional taxi industry, as well as in any other country where there is a
limited number of taxi licenses issued annually. Uber drivers are capable of start-
ing their work a few months or even weeks aer applying, whereas taxi drivers
take much more time to earn their licenses, which are also limited in supply and
usually expensive.
However, in December 2017, the European Court of Justice (ECJ) has ruled
that Uber be treated as a transportation company, which means it will face strict-
er EU regulations. Being a member of the EU, Croatia will also have to change its
treatment of Uber. Possible consequences of this ruling might be that new drivers
(and current ones) will need to provide a taxi driver's license in order to work for
Uber. It could cause a reduction in the labor supply, but on the other hand, pro-
fessional and experienced taxi drivers might ock to Uber.
ere have also been allegations of Uber avoiding tax in Europe by using mul-
tiple subsidiaries located in the Netherlands and the Bermuda islands, and by
taking advantage of tax loopholes in the European countries where it operates. If
true, such tax evasion still isn't illegal, but it is worth discussing since it may be
the primary factor behind Uber's lower prices than taxis. An ethical question also
arises here: since Uber is using given country's infrastructure and not paying tax
there, it seems there is a zero-sum game at play where Uber is on the winning side
and the country and its citizens on the losing side.
Stricter regulation, which should be due to take place aer ECJ's verdict, is
assumed to be a potential solution for the problem of Uber's alleged tax evasion.
3.2. Labor market
Research done in the United States has shown that there are relatively more driv-
ers under 30 working for Uber (19%) than for taxi companies (9%) (Hall, Krueger,
2015). Results from the same paper show that 48% of Uber drivers has a college
degree, as opposed to 18% of taxi drivers. is implies that college-educated Uber
drivers probably have a primary source of income, and their work for Uber is a
source of additional (secondary) income. Another reason why a high percentage
of Uber drivers is college-educated might be that they are currently unemployed
and searching for a job while driving for Uber. Since arriving to Los Angeles,
New York and San Francisco, Uber hasn't signicantly inuenced the unemploy-
ment rate of local taxi drivers (Berger, Chen, Frey, 2017). Perhaps Uber could be
viewed as an innovative company which is going to revolutionize the transporta-
tion service industry. If so, the criticism it is facing is natural and expected, as it
133
Acta Economica, Volume XVI, No. 28 / June 2018 123 – 136
was with all new technologies and inventions in human history. In the long term,
professional taxi drivers could completely switch to working for Uber.
Media outlets all around the United States began reporting in late 2017 that
Uber is taking over taxi transportation in major US cities, i.e. it getting more
rides than taxi companies. is information could be regarded as bad for taxi
drivers, but it could also be seen as the beginning of a transitional period which
is benecial for the unemployment rate and the economy in the long term. In the
short term, we might expect a reduction in traditional taxi companies' prots, a
rise in unemployment of taxi drivers and a speeding momentum in Uber's mar-
ket share growth, as well as its competitors'. In the long term, the expansion of
services such as Uber and Ly, where there is a low barrier of entry, could mean
that former taxi drivers can easily switch to working for Uber, Ly and similar
companies.
We live in the digital age which, similar to the industrial age, brings innova-
tion, paradigm shis, as well as new technologies, services and products. Old
industries and practices are being replaced with new ones. In this process, an
asymmetry is inevitable in the form of a discrepancy between the type of labor
supplied and demanded. Such conditions on the labor market are perceived as
fatal and permanent by most people, who fail to notice that in the long term,
the economy must adapt to the new technology, product or service. Adaptation
is not an abstract process, or a natural (automatic) occurence. It is an emerg-
ing eect where new generations have a dierent educational direction, current
generations switch jobs or start entirely new careers, and companies embrace the
innovation over a period of time.
3.3. Competition
Observed from a microeconomic standpoint, Uber could be seen as a better sub-
stitute for taxis. Besides competitive prices, Uber oers quick service by employ-
ing their own smartphone apps, better quality of service, possibility of choosing
the vehicle type, drivers etc. Taxi companies are under strict control of local and
central authorities, and as such have little inuence on ride tarrifs. Uber, on the
other hand, has complete freedom in choosing its price policy. It only taks into
account factors such as the geographical location, elasticity of demand, type of
service, etc. Most taxi companies hold some sort of monopoly in the cities where
they operate. Even more, when viewed together, all of the taxi services in a given
city have similar quality of service. For example, taxi customers cannot choose
the car they'll ride in, nor the driver in most cases. Uber usually oers vehicles
of better quality, even luxury cars, which attracts many customers and in some
cases even justies a higher price than regular taxis. All of the features that Uber
oers and taxis don't, imply that the rational consumer will choose Uber over
134
Lana Pepić e sharing economy: Uber and its eect on taxi companies
taxis. is new standard in quality and speed of service which Uber introduced
to the market may be a positive incentive for taxi companies. A healthy dose of
competition benets customers in the long run.
e nature of 21st century technology startups which become large compa-
nies must be taken into account. ese kinds of companies have a high probabil-
ity of developing a monopoly on their respective markets. Many factors create
this climate, among which a lack of a good substitute (for example, Facebook or
Google) because of the uniqueness of the product or service, acquisitions of com-
petitors in early stages, and an ever-increasing market share because of increasing
marketing budgets, brand recognition and customer loyalty. A monopolized taxi
market is a scenario nobody wants, so some form of regulation regarding compe-
tition must be employed. It is already an issue, though, considering the fact that
Uber has spread around the world and it is buying international startups, even
those not directly related to transportation.
e analysis in this paper has shown that Uber Croatia does oer lower prices
most of the time. e reason is that Uber has lower xed costs (it does not own
vehicles), fewer employees because the mobile app serves as a middleman, a low
entry barrier for employees and therefore a greater supply of labor, and nally a
lower tax burden. is fact puts Croatian taxi companies in an uncomfortable
position. ey are taking measures to ensure that their service is competitive to
Uber: mobile apps, for example, as well as rating systems and better vehicles.
Conclusion
e sharing economy has brought changes to many industries, but Uber has been
one of the frontrunners in market disruption. Traditional taxi companies are al-
ready forced to change their services, and new ways of obtaining a competitive
edge will be further needed. anks to its orientation towards online payments,
GPS tracking, rating systems and a wide network of drivers, Uber oers a greater
degree of transparency and exibility. It is up to governments and other legal
subjects to appropriately regulate Uber and ensure its price policy is fair and not
founded on tax schemes or predatory pricing.
e impressive expansion of Uber has happened thanks to customers, who
have been choosing Uber many times over traditional taxis. e market is driven
by the individual consumer's decisions, and many advantages of Uber over tradi-
tional taxi companies are driving demand for their services. erefore, from an
objective standpoint, Uber oers better conditions for both customers and em-
ployees. Customers receive faster and more quality service, and employees have
the exibility they would not most likely have if they worked in the traditional
taxi industry.
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Acta Economica, Volume XVI, No. 28 / June 2018 123 – 136
Uber has a clear advantage by being one of the rst companies on the market
with a business model based on the sharing economy in the transportation sec-
tor, but many competitors such as Ly are there to secure there is no monopoly.
erefore, even if the traditional taxi is destined to disappear in a few years or
decades, having a non-monopolized transportation industry is crucial and will
allow for a smooth transition from taxis to app-based services based on the shar-
ing economy.
However, to ensure long-term benet, regulators must concentrate on the
short-term by paying close attention to Uber's tax policy, and not only with Uber
but also with every other multinational corporation. Uber is special in this case
because its service is not free (as opposed to Facebook, which is also said to have
an elaborate tax scheme) and a lighter tax burden means unfairly price lower-
ing. In conclusion, a new type of service is always welcome if it is better in most
aspects and as such recognized among consumers. But competition must remain
fair and employees must be protected.
References
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Lana Pepić e sharing economy: Uber and its eect on taxi companies
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... In taxi services, the customers were given the ability to use their smartphones to order taxis instead of calling taxi companies (Rasheed, Mazhar & Shahid, 2018). By applying the "Sharing access" concept in taxi industry, it is identified that there was no need for an intermediary between customers and drivers to bring those two parties together (Pepić, 2018). The app-based taxi services changed the entire taxi service industry by offering the service for a cheaper price than the traditional taxi services. ...
... It is being very convenient for customers to use the app (Sharma & Das, 2017). Therefore, traditional taxi companies had to transform their business model in order to face the competition and to survive within the industry (Pepić, 2018). According to Rasheed et al. (2018) transferring into an app-based taxi service itself would not provide the benefit, but the organizations must be updated with the current technologies in order to get the competitive advantage. ...
With the technology revolution, studying about customer satisfaction has been a major concern for the companies in highly competitive industries. Transportation industry, is not an exception, specially, the mobile app-based taxi industry in past few years with the increased usage of mobile applications (Pasharibu, Paramita & Febrianto, 2018). A good customer base for a company ensures the long-term survival and competitiveness in the market. Achieving customer satisfaction is the only way to gain and retain a good customer base for the company (Rasheed, Mazhar and Shahid, 2018). Therefore, focusing on the factors affecting the customer satisfaction is important to gain competitive advantage and to become the leader in the industry (Pasharibu, Paramita and Febrianto, 2018). Though there were some studies done in this domain, there was a lack of research in relation to mobile app-based taxi service in the Sri Lankan context. Thus, the purpose of this study was to identify the factors affecting customer satisfaction in mobile app-based taxi services and to identify their impact. The research model and the hypotheses for the study were derived based on a comprehensive review of literature. The study followed a positivistic approach with the quantitative method. Convenience sampling method was used due to the time constraint of this research. Online questionnaire survey was administered to collect data for this study. Structural equation modelling (PLS-SEM) was used to analyse data. The model was tested by collecting data from hundred mobile app-based taxi users in the Colombo District. Reliability and validity of the measurement instrument were established. Price, Trust and Coupon Redemption had significant effects on Customer ii Satisfaction in mobile app-based taxi services. The findings of this study provided implications for policy makers and mobile app-based taxi service companies.
... First, we analyse the fares applied by a ride-hailing operator over a long period of time (10 months), to explore the evolution of Uber fares according to several variables. Some previous studies are based on simple simulation approaches (Pepić 2018), or online surveys to riders (Smart et al. 2015), but did not examine prices actually offered to ride-hailing customers. Other contributions have focused on fare supply during short periods (days or weeks), or special events (Chen 2017;Hall et al. 2015;Jiao 2018;Shokoohyar et al. 2020), but they lack insight from longer timespans, which is important to obtain robust conclusions on the patterns followed by ride-hailing fares. ...
... In general, our findings suggest that taxi fares are higher than Uber ones in all types of the day: working days, Saturday, Sunday, and holidays. This result confirms the hypothesis proposed by Pepić (2018), who obtained similar results regarding taxi and ride-hailing prices on the basis of a simulation approach. ...
Ride-hailing is an emerging service that is transforming door to door mobility in urban areas. Users can easily request a ride through a smartphone app that informs them of the pickup time, the location of the vehicle, and the fare that they will pay in advance. Even though it is well known that Uber implements a dynamic pricing approach depending mostly on supply, demand and competition with other services, there is still little empirical evidence on the main drivers explaining the fare strategy of the company. However, a deeper understanding of prices is essential to evaluate and establish a future scenario with smarter regulation and fairer competition between ridesourcing and taxi services. Using 10-month data from the Uber's application programming interface in the city of Madrid, this research studies the association of Uber fares with different explanatory variables. It also explores the main differences between Uber and taxi fares. The results indicate that trip distance, trip delay, day of the week, origin and destination of the trip, and rain precipitation have a statistically significant impact on Uber fares. The findings also show that on average, Uber fares are lower than taxi fares, with the exception of particular hours of the day, as well as Uber fares slightly increased during taxi strikes recently happened in Madrid. The paper concludes with some policy recommendations and insigths regarding the future of the hailing sector and the importance of prices in evaluating future changes and possibilities.
... Uber provides a smartphone application to connect drivers and riders (Uber 2021b), offering greater transparency, lower prices, and a faster service than traditional transport providers (Pepić 2018). The passenger is charged according to time and distance driven. ...
Orientation: Uber is a leader in the gig economy both internationally and in South Africa. One of the key elements of Uber's business model is that drivers operate as independent contractors rather than employees. Whilst this may reduce costs, it may also negatively affect tax collection. Research purpose: This study considers whether Uber drivers should be classified as employees or independent contractors in South Africa for employees' tax purposes. Motivation for the study: As the gig economy expands, uncertainty exists as to how traditional approaches to taxation apply and the extent to which they remain appropriate to new business models that have non-traditional relationships with their participants. This is evident by the extent of disputes arising internationally, and particularly in the United States of America (USA), where Uber was founded. Research approach/design and method: This study engages in comparative legal research to determine the extent to which attempts to resolve this question in the USA may inform the South African context. Main findings: The lack of consistent classification outcomes in the USA suggests that it may be difficult to reach a conclusive classification of Uber drivers in South Africa for employees' tax purposes using the current tests. Whilst these tests may be adapted, this study supports calls for rethinking the link between tax collection and traditional employment relationships. Contribution/value-add: This study contributes to the development and interpretation of South African tax legislation in the context of new technologies and business models, and provides recommendations for rethinking the approach to tax collection in these contexts.
... This independent variable is also statistically significantly related to e-hailing service satisfaction, where the p-value is (p<0.000). These findings are aligned with research carried out by Pepić (2018), which stated that competitive price contributes to ehailing's success over taxi companies. ...
- Mohamad Niza
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- Najiah Filzah
E-hailing is an online transportation administration recognised as the travellers' top pick in the transportation industry, including collaboration among clients and service providers. As clients now are more informed and can decide to choose any service provider they prefer, the e-hailing companies are obligated to fulfil and offer better support to their numerous clients, particularly for e-hailing administration. Keeping up consumer loyalty is vital for e-hailing's specialist organisations to support upper hands. This research aims to investigate the role of safety and security, price, convenience and accessibility and whether they affect e-hailing service satisfaction. This research adopted a quantitative research methodology using a survey approach. Data was collected from 276 e-hailing services customers from higher learning institutions using an online survey. Data were analysed using the Statistical Package of Social Sciences (SPSS), and a few analyses were carried out, such as descriptive analysis, correlations and regression analysis. The results have shown that all factors have somehow affected e-hailing service satisfaction. This result will provide understanding to ridesharing service providers and can be used to improve their services by looking at the most and least influencing customer satisfaction. In the future, researchers could include diverse variables to study the customer satisfaction of e-hailing services in Malaysia.
... The developments of Information and Communications Technology (ICT), which cause the evolution of emerging transportation modes, are inevitable. The concepts of peer production, also known as a sharing economy in the digital era, was discussed by (Benkler, 2002), and (Pepić, 2018). It connects the service, which is offered by a company, to individuals through the internet. ...
The research presented in this paper analyzed two data sets Revealed Preference (RP) and Stated Preference (SP), obtained with a new travel diary and mode choice survey. This survey, called Mobility Jakarta, combined both RP and SP parts and was conducted in the Greater Jakarta region. This is the first survey that collected responses from a substantial sample of the whole metropolitan area population. We estimated the discrete choice model pooling SP and RP data sets. We explored the Willingness To Pay, e.g., the Value of Travel Time Savings, and the elasticity for all mode choice alternatives, including On-Demand Transport and Urban Air Mobility.
... type and quality of work) they need to work (Benjaafar and Hu, 2020). For instance, in Croatia, since Uber offers flexible working hours, it attracts the attention of drivers and, thus, they can have a preference of working as a taxi driver and an Uber driver (Pepić, 2018). In general, once a customer requests a car through the Uber application, after completing required parts (e.g. from where to where) and acknowledging the calculated price, the nearest taxi information with several details (e.g. its active location, its plate number, name and ratings of the driver) is shared with them. ...
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![Berk Kucukaltan]()
Today, the world has been witnessing to structural changes at different levels and some external factors (e.g. COVID-19) have particularly accelerated these changes. In the new world order, people seek effective solutions to some challenges they confront in their daily lives while organisations are in quest for becoming more competitive by using innovative technologies to address these needs. As a result, with the introduction of digitalisation, there has been a transformation from traditional business models towards technology-based on-demand business models to be used in transportation. Especially, considering the complex structure and high density of metropolitan cities, such as Istanbul, using on-demand transportation platforms can be worthwhile for passengers. However, despite the increasing attention paid to these platforms, there is a limited number of studies exploring these business models and their impacts from different aspects. Therefore, this research aims to investigate the practices of two exemplary technology-based on-demand transportation business models, Uber and BiTaksi, and to propose strategies based on several prominent attributes. Consequently, the discussions and proposed strategies regarding the established attributes hold a significant potential to advance the nascent knowledge about digital transportation business models, especially in the comparison of an international and a national platform, and to offer strategic guidance to practitioners and policy-makers in business environment.
... type and quality of work) they need to work (Benjaafar and Hu, 2020). For instance, in Croatia, since Uber offers flexible working hours, it attracts the attention of drivers and, thus, they can have a preference of working as a taxi driver and an Uber driver (Pepić, 2018). In general, once a customer requests a car through the Uber application, after completing required parts (e.g. from where to where) and acknowledging the calculated price, the nearest taxi information with several details (e.g. its active location, its plate number, name and ratings of the driver) is shared with them. ...
... The popular Uber Sharing Service has influenced the taxi industry by providing lower prices, faster and better service, as well as a higher level of transparency regarding driver selection and fare. Pepic [18] examines Uber. She investigates whether Uber represents loyal or false price competition to taxis by significantly lowering prices, lowering fixed costs and circumventing intermediaries. ...
- Tatiana Sorokova
- Daniela Petrikova
This paper presents the characteristics of the shared economy phenomenon. The theoretical part focuses on the activities of the shared economy in the current international market environment. We describe the categorization of shared economy activities across platforms. We devote ourselves to measuring a shared economy because it also generates many values that are not fully captured in GDP data. The global value of the shared economy is only an estimate. We also deal with threats to the shared economy as these can also be seen as a growing network of unregulated digital markets. These pose a threat to regulated businesses and to consumers. Shared economic platforms are different in national economies. They are highly criticized in some economies because they create unfair competition conditions. They create illegal, black or gray markets or support, for example, tax avoidance. The shared economy also generates many values that are not fully captured in GDP figures. The research part of the paper consists of an UBER analysis in selected countries. At present, UBER is one of the most widespread structures of the shared economy compared to classic taxis. The analysis offers a comparison of the UBER platform, which can bring a new perspective on shared economy issues. The selected indicators are country-specific and collected for two periods: before the UBER come to country and after that.
... The computer, the Internet, mobile, Internet of Things, blockchain, and social networking technologies have brought about the much needed spatio-temporal coordination of exchange activities, which was at dearth at the time of Breyer [10] or Felson and Spaeth [19]. An innovative mobile application, such as Uber, draws on technology to put hailers directly in contact with drivers, circumventing traditional taxi dispatching systems, rendering them irrelevant middlemen in the transportation supply chain [26]. In addition, the special status of the drivers, as autonomous workers not formally employed by Uber, lowers the price of the rides [27]. ...
The current business paradigm entails a narrow, profit-centered and managerially-focused nature. This article proposes that the study of the collaborative economy necessitates an inevitable shift in the conventional business paradigm and suggests that the institutional school of marketing thought, in general, and the electric theory of marketing, in particular, offers a useful theoretical framework for investigating the theoretical impact of the collaborative economy on the value chain. Uber is used as an illustrative case, on which the electric theory of marketing is applied, to demonstrate how the archetype of the collaborative economy theoretically impacts the value chain and contributes to sustainability in the value chain in the transportation services industry. The study provides further insights in the form of suggestions and propositions for ensuring sustainability in the value chain of collaborative systems.
- Thor Berger
- Chinchih Chen
- Carl Benedikt Frey
A frequent belief is that the rise of so-called "gig work" has led to the displacement of workers in a wide range of traditional jobs. This paper examines the impacts of the flagship of the gig economy—Uber—on workers employed in conventional taxi services. Our analysis exploits newly collected data on the staggered rollout of Uber across metropolitan areas in the United States and a difference-in-differences design to document that incumbent taxi drivers experienced a relative earnings decline of about 10 percent subsequent to Uber's entry into a new market, while there are no significant effects on their labor supply. Additional evidence from a battery of placebo tests, event study estimates, and specifications using Google Trends data to capture differences in treatment intensity underlines these findings. A triple-differences design that compares changes among taxi drivers relative to bus, tractor, and truck drivers that were unaffected by the arrival of Uber, provides further supporting evidence that the diffusion of Uber has reduced the earnings potential of incumbent drivers in conventional taxi services in the United States.
- Jonathan V. Hall
- Alan B. Krueger
Uber, the ride-sharing company launched in 2010, has grown at an exponential rate. Using both survey and administrative data, the authors provide the first comprehensive analysis of the labor market for Uber's driver-partners. Drivers appear to be attracted to the Uber platform largely because of the flexibility it offers, the level of compensation, and the fact that earnings per hour do not vary much based on the number of hours worked. Uber's driver-partners are more similar in terms of their age and education to the general workforce than to taxi drivers and chauffeurs. Most of Uber's driver-partners had full- or part-time employment before joining Uber, and many continue in those positions after starting to drive with the Uber platform, which makes the flexibility to set their own hours especially valuable. Drivers often cite the desire to smooth fluctuations in their income as one of their reasons for partnering with Uber.
- Yochai Benkler
The paper explains why open source software is an instance of a potentially broader phenomenon. Specifically, I suggest that nonproprietary peer-production of information and cultural materials will likely be a ubiquitous phenomenon in a pervasively networked society. I describe a number of such enterprises, at various stages of the information production value chain. These enterprises suggest that incentives to engage in nonproprietary peer production are trivial as long as enough contributors can be organized to contribute. This implies that the limit on the reach of peer production efforts is the modularity, granularity, and cost of integration of a good produced, not its total cost. I also suggest reasons to think that peer-production can have systematic advantages over both property-based markets and corporate managerial hierarchies as a method of organizing information and cultural production in a networked environment, because it is a better mechanism for clearing information about human capital available to work on existing information inputs to produce new outputs, and because it permits largers sets of agents to use larger sets of resources where there are increasing returns to the scale of both the set of agents and the set of resources available for work on projects. As capital costs and communications costs decrease in importance as factors of information production, the relative advantage of peer production in clearing human capital becomes more salient.
What Are The Ethical Challenges That Uber Faces In Using App-based Peer-to-peer Sharing Technology
Source: https://www.researchgate.net/publication/329898519_The_sharing_economy_Uber_and_its_effect_on_taxi_companies
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