Developing A Digital And Sharing Economy, Platform Development Strategies And Pricing Schemes

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INTRODUCTION Technological advancements spurred the creation of a digital and sharing economy. It is easier than ever for two people from different locations to connect and do business with one another. With the evolvement of the sharing economy, a smartphone application by the name of Uber has been born and is a potential monopoly in the making. This essay aims to answer the following question: What growth strategies have Uber used in the market and what impact do these strategies have on the market? To answer this question the author will examine Uber role in the sharing economy, platform development strategies and pricing schemes used by Uber, and Uber’s impact on the car ownership industry. Many of these themes such as pricing…show more content…
Uber is a thus a multi-sided platform, or in other words acts a digital location where buyers and sellers meet. Since it is a multi-sided platform connecting two parties, Uber is only valuable if their is a significant number of both parties in the platform. The firm which has the highest number of install base will increase its value and at the same time decrease its competitor’s company value. THEORY OF NETWORK EXTERNALITIES AND PLATFORM DEVELOPMENT STRATEGIES The theory of network externalities exists when the benefit a user has from consuming a product increases as the number of users of that product increases; The value of the company increases as the number of users of the product increases. Uber is faced with these direct network effects. Drivers want to be with the application that has the most customers so that they can minimize waiting time, and customers want to be with the application with the most drivers so they can also minimize waiting time for a car. Thus, as the number of customers and drivers get big enough, it will be almost impossible for any firm to come in the market and compete with Uber. Uber will become a monopoly and can dominate the market. In order to become a monopoly, the install base must be large enough. Uber is the loss leader and has set their car prices very low, below the rates of most taxis around the world. The reason for this is that the lower the price, the lower the tipping point or in other words Uber

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