Uber Fare Adjustments Found to Have No Effect on Drivers' Pay

choi

Greg Bensinger, Uber Fare Adjustments Found to Have No Effect on Drivers' Pay; The ride-hailing firm must rely on pricey incentive payments to bring earnings up. Wall Street Journal, Nov 13, 2017.
https://www.wsj.com/articles/ube ... ange-pay-1510491602

Quote:

"Hours before Uber Technologies Inc.’s chief executive resigned in June, the ride-hailing company announced a six-month goodwill effort to ease its strained relationship with drivers

"The dilemma is laid bare in a recent study by Uber, conducted in cooperation with a New York University assistant professor, that found that no matter which direction fares go, drivers inevitably take home about the same earnings over time.

"When there is a fare cut, driver's pay per trip falls but riders flood the service, offering more business. A price rise eventually lures more drivers than Uber needs and scares away riders. The changes are short-lived as an equilibrium is reached after about eight weeks, and drivers' average pay comes out the same.

" 'The overwhelming story is that it doesn't seem to matter what Uber does with fares' when it comes to drivers' earnings., said John Horton, an NYU assistant professor of information, operations and management sciences, and a co-author of the study, called 'Labor Market Equilibration: Evidence from Uber.' His co-authors are two Uber executives, Jonathan Hall, the company's chief economist, and Daniel Knoepfle, a senior economist.

"All of this means Uber, and other ride-sharing services, must lean heavily on pricey incentive payments  -- cash for completing a certain number of rides a week, say -- to bring driver earnings above what typically amounts to around minimum wages.

My comment:
(a) There is no need to read the rest.
(b) The equilibrium is Nash equilibrium, named after John Forbes Nash Jr, of "A Beautiful Mind" fame.