Uber vs HK Taxi – Alignment of interests
Parth ShahParth Shah
Parth Shah
Seasoned Finance, Sales, Marketing and Strategy Professional
發表於 2023 年 6 月 15 日
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Have you noticed how if you hail a taxi from the street, taxi drivers will stop or slow down at every traffic light on purpose? Sometimes they refuse a hail, or charge an obscene price? Whereas if you order a taxi on Uber, the same driver will speed up and drive like he’s in Formula One? Have you noticed the difference of how Taxis drive when they are occupied vs when they are vacant?
This is a classic example of alignment of interests. The taxi’s make more money the longer you sit in the taxi. Not only is distance a marginal earner but waiting time too. On the contrary, the Uber driver earns a pre-booked amount (except for exceptional circumstances of excess waiting or traffic, See note 1), regardless of the time taken (which is built into the pre-agreed fare), thus has no reason to take a detour and keep you in the ride for longer). In fact, Uber drivers are incentivized to go as fast as possible and skip through the yellow lights, so they can accommodate more rides per time period.
The Taxi meter fares are a function of actual ride distance and time, whereas Uber Fares are a function of a pre-determined price (which comprises of a multitude of functions such as distance, demand/supply, traffic conditions, etc.). Taxis are incentivized to stop at every traffic light and keep you on the ride for as long as possible, whilst covering the same distance. They make marginal utility with the distance, and the time stopped at each junction.
Why do we pay a premium to book a ride through the Uber app? Despite the Taxi’s stopping on every light and driving like slugs on purpose where the meter jumps, they would still end up (generally) costing less than a ride booked through Uber. We still use the Uber app for accountability and peace. We can deduce that if one can afford the taxi fares, they can afford the marginal increment to book an Uber. Accountability and peace more than proportionately cover for the difference.
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