Economic Analysis for Business Decisions

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Table 1: Uber Prices[pic 1]

Prices between the various service options available to consumers were compared and regression analysis was used to determine if daily increases in Uber usage (dependent variable) led to s subsequent reduction in other cab services (independent variable). Consumers have many options and the regression would show whether or not an increase in Uber usage could be attributed to a decline in taxicab usage.

Results

Uber offers several different services as represented by the different cars. From Table 1, UberSUV has a base of $14 and a per mile rate of 4.5 dollars, UberBlack has a base of $7 and is 3.75 dollars a mile, UberXL has a base of $3.85 and then costs 2.85 dollars a minute, and UberX has $2.55 baseline fare and is 1.75 c dollars per mile after that. In addition, UberFamily and WAV are UberPool, which matches you with another nearby rider going in the same direction so that you can split the fare. That one's $2.55 baseline and 1.75 dollars per mile.

I start at figuring out Uber average price of per mile in dollar. I take the average from Per Mile. It is $2.73. In addition, the average from Per Minute is $0.50. On the other hand, base on Metered Fare Information for Taxi in New York, the initial charge is $2.50, and plus 50 cents per 1/5 mile and 50 cents per 2 minutes. In other words, taxi has a base of $2.50. A per mile rate is 2.5 dollars, and A per minute rate is 25 cents.

When you look up the Uber Price in Table 1, There is a base rate, a charge per mile and a charge per minute. It looks like the pricing structure you know well from all the miles you have logged in cabs. But Uber's pricing is actually a little different from Taxi's pricing. Taxis charge riders per mile when moving, and per minute when idling. Uber chargers riders per mile and minute whether they're moving or idling.

For this analysis, I used $2.55 for base fare in Uber Price, the service where drivers use their own cars. Assume the trip is 5 miles and takes 10 minutes. Also, assume there is no waiting time. Uber fares total would be $21.20, and the taxi fares total would be $15.00. However, for Taxi, it needs to add a tip of 20% to the cab fares, so the total would be $18.00. By contrast, Taxi is cheaper than Uber to use in New York.

For the second question, the data came from FiveThirtyEight.com. It provided a comprehensive data about the industry and included Uber and the data of ten other major companies including American, Carmel, Dial 7, Diplo, Firstclass, Highclass, Prestige, Skyline, Lyft, and Taxi. Moreover, Taxi includes Yellow Taxis and Green Taxis. The data shows their trips per day from July 1, 2014 to September 30, 2014. The regression shown that the competition from Uber and other smaller taxicab services accounts for nearly 88% of the variance in miles driven by the larger established taxicab services.

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Figure 1 :Regression

Taxi = 182,488 + 100.6848*American – 14.5001* Carmel + 3.828267* Dial 7–

13.05904*Diplo + 49.04094*Firstclass – 59.24077* Highclass +

21.29862* Prestige + 7.393377*Skyline – 2.80265*Lyft +

5.576836*Uber.

It shows when American increases by 1 mile, Taxi will increase by 100.6848 miles. When Carmel increases by 1 mile, Taxi will decrease by 14.5001 miles. Evidenced by the same token, when Uber increases by 1 mile, Taxi will increase by 5.576836 miles. It shows Taxi's passenger is more than Uber's passenger.

If we take the each per mile rate to calculate the revenue, Uber's revenue is $2.73 ($2.73*1), and Taxi's revenue is $13.94209 ($2.5* 5.576836). Compare the analysis above, Taxi can earn more money than Uber in a day although Taxi is cheaper than Uber to use in New York.

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Figure 2: Average Price from July 1, 2014 to September 30, 2014

Figure 2 shows Taxi Average Price from July 1, 2014 to September 30, 2014, and Uber Average Price from July 1, 2014 to September 30, 2014. For the Taxi, the lowest price is $870,770 on July 4, 2014, and the highest price is $1,434,160 on September 13, 2014. For the Uber, the lowest price is $29,675 on July 5, 2014, and the highest price is $117,734 on September 13, 2014.

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Figure 3: Taxi vs. Uber

Figure 3 is compared Taxi with Uber. Taxi has Green Taxis and Yellow Taxis in New York City. It shows how many miles they drive everyday. We can see that Uber is lower than Taxi, whether is Green Taxis or Yellow Taxis. In addition, we can know that Green Taxis is higher than Yellow Taxis during the three months.

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Figure 4: Uber Market Share

Figure 4 is Uber Market Share. The formula is Uber trips per day divide by Yellow Taxis trips per day add to Green Taxis trips per day. The range of the percentage is from 3.00% to 7.58%. Although, Uber's Marker Share is growing and reaching over 400,000 trips per day, it does not cause a loss to Taxi.

Conclusion

In brief, Uber does not cause disruptive change in the Taxi business in New York City. The data will provide strong talking points. This analysis shows Taxi is cheaper than Uber in NewYork City, and when Uber increases by 1 mile, Taxi will increase by 5.576836 miles, so Taxi industry uses the lower price to make the higher revenue. In addition, Uber Market Share is lower, so it does not cause affect in Taxi industry in New York City.

To be sure, this analysis has shortcoming, the data on Uber are not actual measurements of Uber use. They are data on the prevalence of Google searches for “Uber” in New York. It is secondary data that from a group names FiveThirtyEight. Even with its limitations, this analysis has also proven that pricing strategies is very important for the industry.

Bibliography

Leah-Martin, Vincent. (2015) “When to Quit: Narrow Bracketing and Reference Dependence in

Taxi Drivers,” Working Paper University of California San Diego.

Schneider Todd, W. (2015, November 17). “Analyzing 1.1 Billion NYC Taxi and Uber Trips, with a