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Running head: Case Analysis of Uber 1 Unit VIII Journal MBA 6053 Economics for Managers Jamel Latrell Xavier III Professor James Halstead September 22, 2020

Running head: Case Analysis of Uber 2 Table of Contents Introduction ................................................................................................................................ 3 Market Before Uber and its Exploited Inefficiency ................................................................... 3 Uber’s Surge Pricing and Shifts in Supply and Demand ........................................................... 5 Uber’s Surge Pricing and Price Discrimination ......................................................................... 6 Uber Business Model and Economic Concepts ......................................................................... 7 Economies of Scale .................................................................................................................... 7 Economies of Scope ................................................................................................................... 8 Game Theory to Uber’s Market ................................................................................................. 8 Uber’s Potential for International Expansion and Potential Trade Policy Issues ...................... 9 Incentive Pay Model of Uber and its Influence on Principal-Agent Issue ................................. 9 Asymmetric Information Complexity with Uber’s Business Model ....................................... 10 Conclusion ................................................................................................................................ 10 References ................................................................................................................................ 12

Running head: Case Analysis of Uber 3 Case Analysis of Uber Introduction Advanced innovation creates a massive disruption in various sectors by transforming traditional processes into contemporary ones to attain sustainability and profit maximization in the competition. Further, globalization and Industry 4.0 are the other factors that increase the demand for innovative business practices to avail excessive opportunities for the global business environment (Cramer & Krueger, 2016). By overviewing the importance of disruptive technology, Uber executes GPS technology in the ride-sharing business fthat completely advances the transportation industry. Because of the particular change in the industry, Uber intensely contends with the local juggernauts in transportation while obtaining success while offering ad hoc opportunities to millions of drivers all over the globe (Dudley, Banister & Schwanen, 2017). The following practices are used by Uber as part of their business model, price surge, price discrimination, game theory, trade expansion, economies of scale, incentive pay model and economies of scope models in the business (Cramer & Krueger, 2016). Uber’s questionable credibility in the transportation sector will continue to be in question. The following information and research expounds the essential concepts of economics for understanding the role of Ubers processes and its organizational performance. Market before Uber and its Exploited Inefficiency Uber’s path of ruin, began during the inception of their business while losing gross profits during the first nine years of the company’s initial inception. While other corporation’s utilized traditional methods and business practices. Uber investors never expected their returns would come from industry utilizes traditional business practices, which is less reliable for customers because of no convenience and accessibility of taxis on the fingertip. However, Uber pursued a growth at all costs strategy financed by a stunning $20

Running head: Case Analysis of Uber 4 billion in funding by its investors. When introducing the concept of shared-economy that delivers substantial value to riders and consumers it was found to be appealing to the masses. Uber’s massive subsides were unequivocally anticompetitive and unsustainable- but they made the company enormously popular as mentioned when passengers enjoyed not having to pay the full cost of their service. Majority of the criticism concerning Uber was focused on the narrow behavioural and cultural issues, including deceptive advertising and pricing, algorithmic manipulation, driver exploitation, deep-seated misogyny among executive’s, and disregard of laws and business norms ("Uber’s path of destruction," 2019). Uber’s long game planned to eradicate all definitive completion and then profit from its innovation by way of power in numbers. Uber, in a short amount of time had become internet and social media famous, not achieving Facebook and or Amazon powered platforms yet very close. Like so many start-up companies Uber’s investors agreed to go public with the company, in hopes of exploiting the masses of gullible investors in order to generate enough revenue with its current popularity based of the popularity efficient innovations attracting investors who do not care about the inability to generate profits. Eventually, false narratives created the beliefs that Uber’s corporate value was sound and reasonable making it attractive to the tech world, media and investment groups. And out of thin air the belief’s surrounding Uber lead to it being considered the most valuable transportation company on the planet and the second most valuable start-up IPO in U.S. history only to Facebook ("Uber’s path of destruction," 2019) . The narrative created by Uber was simply its way of bending public perception on how new and massive company could create a false narrative types of manufactured employment. This was probably the largest representation of their strength, meaning the false and constructive narrative. Yet in reality, Uber’s platform wasn’t a ground-breaking technologically advanced

Running head: Case Analysis of Uber 5 breakthrough, nor has Uber unsettled the traditional urban car services. The respective business model exploits riders with moving targets to maintain the supply of Uber drivers, which is considered as the coercive tactic to manipulate riders with psychological tricks. Uber exploited the idea that competitive consumer and capital markets will maximize overall economic welfare by rewarding companies with superior efficiency. Like so many other companies with multibillion dollar subsidies, Uber completely distorted marketplace price and service signals, leading to a massive misallocation of resources. Uber never created wealth for the consumer, workers, it’s cites being serviced or anyone else outside of its own private wealth and financial growth. Uber’s, proposed agenda was to exploit the offerings of work flexibility, autonomy, command and free enterprise while enjoying producing your own uncapped income. The other factors that contribute to utilizing inefficient practices include the use of drive- passenger association system, promotion of the labour-supply model in the transport sector, inefficient taxi regulations and improved market share for Uber (Cramer & Krueger, 2016). Because of the inefficiency in taxi regulations no power is given to the riders to take advantage of the available information and choose the rides accordingly, which can lead towards misleading practice due to limited control over drivers (Dudley, Banister & Schwanen, 2017). This opened the door for Uber to change the transportation sector with innovation and exploiting inefficient regulations that need to be resolved to deliver unusual services for customers as well. Uber’s Surge Pricing and Shifts in Supply and Demand Economists like to use Uber as the embodiment of a functioning supply-and-demand economy. When David Sacks the CEO and founder of Yammer tweeted a sketch of Uber’s network effect. He put simply and elegantly, network effect is the phenomenon in which a

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