Uber is the giant in the room for on-demand transport. Its rapid growth is challenging traditional approaches to on-demand transport. In particular, Uber, Lyft and local services such as Liftago in Prague are revealing that for many passengers and drivers, existing taxi services do not provide the features that they want.
One of the key features of Uber’s approach is dynamic pricing; that is, the price passengers pay and the amount drivers are paid varies depends on demand of passengers and supply of drivers—an example of a market-based approach. Although many details of the mechanism are not transparent, there is evidence that Uber’s approach is beneficial for some passengers and drivers in some regions, but, crucially, not all.
The fact that Uber’s approach is not universally superior is important. What it reveals is that there are many factors that determine the success of an on-demand transport service, and that this success is greatly dependent on the region it is implemented. This suggests that competitors to Uber, exploiting services based on different mechanisms, can overtake Uber in some regions.
In this series of posts, we introduce a methodology to compare and help recommend the right on-demand transport service to implement in a given region. We believe that our methodology will aid new providers and municipalities to decide on what classes of services are best suited to their region.
In the next post, we take the first step of identifying the different classes of on-demand transport services. This will form the basis for our comparisons in later posts.