The Uberisation of the Economy

“LET’S Uber.” Few companies offer something so popular that their name becomes a verb.
But that is one of the many achievements of Uber, a company founded in 2009 which is now
the world’s most valuable start-up, worth around $70 billion. Its app can summon a car in
moments in more than 425 cities around the world, to the fury of taxi drivers everywhere.
(From The Economist, Sep 3rd 2016). Uber has changed the taxi industry by promoting a new
business model. But this uberisation of the sector came with contradictory reports discussing
its overall effect on the social welfare. The aim of this essay is to provide an economic
analysis of Uber’s introduction.
世界上最有价值的创业公司，价值约700亿美元。它的应用程序可以瞬间在全球425多
个城市召唤一辆汽车，这让世界各地的出租车司机感到愤怒。(摘自《经济学人》2016
年9月3日) 优步通过推广一种新的商业模式，改变了出租车行业。但是对这个部门的优
步化出现了相互矛盾的报道，讨论了它对社会福利的整体影响。本文的目的是对Uber
的引入进行经济分析。

Using appropriate economic concepts reviewed in the lectures and your further own readings
discuss the following:
 What is the Uber business model (in particular you can talk about some concepts like
sharing economy and surge pricing)? 优步商业模式是什么（可以谈论共享经济和
激增定价等概念）？
 Discuss the costs and benefits of the Uber introduction for customer and driver. 讨论
优步引入客户和司机的成本和收益。
 Was the legalization of Uber, around 2015-2016 in most of Australian States, a good
decision (i.e. in terms of economic surplus)? [hint: you can search for full or partial
estimations or define which condition(s) should be fulfilled] 优步在 2015-2016 年左
右在澳大利亚大部分州合法化(即在经济盈余方面)是个好决定吗? [提示:可以搜
索完整或部分估计，或者定义应该满足哪些条件]
 As a concluding discussion, do you think this uberisation of the economy can be
applied to all sectors? 作为总结，你认为这种经济“优步化”能适用于所有行业
吗?

Format
You can use headings to help organise your ideas but they are not compulsory. No abstract or
executive summary is required in this essay. A font size of 12 and 2 spacing is recommended.
Word Limit
1500 words with 25% tolerance, exclusive of words in Figures, Tables and References List.
1. Introduction 120 (5-6 sentences)
With the continuous development of the city, the new science and technology has also been
more comprehensively extended and applied. Under the influence of new Internet
technologies, many mobile-based apps have emerged, and Uber is one of the applications that
provides car rental services. Fast-paced urban life has increased the demand for convenient
travel, and the introduction of Uber app has provided people with a more efficient taxi
channel. Uber was founded in 2009 and its operations has covered more than 700 cities
worldwide. It is now valued at more than 70 billion USD (Barkan, 2017). This essay will
focus on the economic analysis of Uber from four aspects: business model, costs and benefits,
discussion about the legalization of Uber and feasibility of uberisation to other sectors.

2. Uber business model (sharing economy and surge pricing) 300

Unlike the traditional taxi industry, Uber's business model is to allocate resources on demand
through an intermediate platform. It integrates the high-end car resources from idle private,
car rental companies and taxi companies on the Internet, and provides car services for the
middle and high-end crowds. Users send a ride-hailing service to Uber platform via the GPS
system, and after the transaction, Uber takes a 20% commission from private car owners. In
other words, Uber uses information technology to freely combine and connect each customer
and completes peer-to-peer transactions through mobile payments. This is actually a very
typical sharing economy model. The sharing economy is derived from the notion that mutual
parties can share value from an under-utilized skill or asset through a shared marketplace or
peer-to-peer application (Derek, 2018). Such shared marketplace might be a business,
organization or government. Through the role of these platforms, people can exchange idle
items, share knowledge and experience, or raise funds from companies or innovative projects.
It can be seen that the model of sharing economy can not only allocate idle resources
reasonably, but also control risks to some extent. Nowadays, the model has swept the world
and penetrated into many industries, the most common of which is car sharing, public
bicycles and accommodation exchange.
Another important business model for Uber is their dynamic pricing strategy, also known as
surge pricing or time-based pricing. Uber has a large database that stores driver information
for all cities within the service coverage. Once a passenger requests a ride, they can
immediately match the most suitable driver. The fare is automatically settled based on GPS
location and street data, and then Uber's own algorithm is used to adjust the time according to
the usual time to get the final number. This is the most critical difference from the ordinary
taxi service, where passengers paid according to the time spent on the journey rather than the
distance. This pricing strategy will motivate drivers to carry passengers during peak hours
and stay at home when demand for rides is low. This can be explained from the perspective
of economics: To solve the imbalance between supply and demand, either increase supply or
decrease demand. The success of dynamic pricing affects the relationship between supply and
demand in two ways (Bill, 2015). The following figure shows the relationship between price
and demand.
When the demand is greater than the supply, the algorithm will automatically increase the
price, reduce the demand and increase the supply, so that the supply and demand reach a
dynamic balance and maximize the benefits.

3. Cost & benefit for drive and costumers 300

When Uber enters a new city, in order to develop the market and cultivate user habits, they
will adopt a unique marketing model and give costumers and drivers many discounts.
This business model provides more opportunities for drivers. Firstly, the registration
threshold for Uber drivers is lower than that of the traditional taxi industry. And these drivers
do not have to pay rent to the taxi company. Secondly, the working hours of drivers are
flexible and free. They can use their spare time to work on this part-time job. Thirdly, the
automatic matching system used by Uber creates the best efficiency for passengers and
drivers, which greatly reduces the waiting time between drivers and customers, so that
indirectly increases the income of drivers. However, drivers who join Uber will also bear
some costs. For example, Uber does not purchase insurance for drivers. Besides, the fuel cost
of the driver at work and the cost of using the mobile phone are all borne by themselves.
Most importantly, car maintenance and depreciation are also indispensable costs for drivers.
Since a more comfortable ride environment will bring passengers a better sense of
experience, passengers may give drivers good feedback. This is a good chance for drivers to
get more orders
For consumers, the convenience and benefits of Uber are even more obvious. Journey costs
for Uber passengers are nearly 20% less than traditional taxis (Deloitte, 2016). This shows
that the Uber model can help people to save money to a large extent, and people often get
some coupons. Not only that, but it also saves time for customers, because people can use
their smartphones to place orders whenever and wherever they want, and they can choose
different service types according to their needs. Compared with traditional taxis, Uber
passengers have less average waiting time. Safe travel is also a benefit of Uber. When a
driver receives the order, the user can view the driver's information and the driver's driving
path, in addition to the estimated arrival time of the driver. When the user gets on the bus, the
meter in the app will automatically start working.

这样的经营模式为驾驶者提供了更多的机会。首先，作为优步司机的注册门槛低于传
统的出租车行业。并且这些司机不需要向出租车公司支付租金。其次，司机的工作时
间灵活而自由。他们可以利用空闲时间来从事这项兼职工作。第三，优步所使用的自
动匹配系统为乘客和司机创造了最佳效率，大大减少了驾驶员和客户相互等待的时
间，间接增加了驾驶员的收入。但加入优步的司机也回负担一些成本，例如，优步公
司并不会为司机购买保险。其次，司机在工作时所消耗的油费以及使用手机的费用都
需要他们自己承担。最重要的是，汽车的维修折旧费也都是司机们不可或缺的成本支
出。

对于消费者而言，优步所带来的便利与益处更是显而易见的。优步乘客的旅行费用比
传统的出租车便宜近 20％（Deloitte 2016）。这表明优步的模式可以帮助人们在很大
程度上节省支出。不仅如此，它还可以为客户节省时间，因为人们可以随时随地使用
智能手机下单，同时还可以根据自己的需求去选择不同的服务类型。相比于传统出租
车，优步的乘客的平均等待时间更少。安全的出行同样是优步的一个好处，司机会与
优步公司签约，并且他们的行程会被追踪记录。

4. Legislation of uber good decision or not? i.e. economy surplus 300

Uber has undoubtedly promoted the development of the sharing economy. At the heart of the
Uber model is the sharing of certain physical assets, such as cars, to increase their efficiency.
This is the classic timesharing model, which would essentially reduce costs. From an
economic perspective, this is actually a model of sharing the "economic surplus." Whether it's
time, items or knowledge, they will only be shared after they have a surplus. Therefore, it can
be said that excess resources are the foundation of all shared economies. Without this
prerequisite, nothing else is effective. But with the development of Uber, its cost structure has
also changed a lot. In the early stage, amateur drivers and idle cars enabled Uber to avoid the
investment in fixed assets and saved a lot of operating costs. But with the rapid increase in
demand, many drivers actually become full-time drivers, which brings new social problems.
For example, this would have a significant impact on the taxi industry in Australia and would
not be conducive to fair competition. However, the legalization of Uber also has great
advantages. In addition to being convenient, cheap and satisfying people's demand for higher
quality and safer services, it also plays a role in promoting the economic development of the
industry. From this perspective, Uber will have a positive impact on the whole society, so its
legalization in Australia is a good decision.

Uber 毫无疑问推动了共享经济的发展。Uber 模式的核心是对某种物理资产，如汽车的

共享，从而提高其使用效率。这是经典的 timesharing 模式，本质是降低成本。从经济
学的角度来说，这其实是一种共享“经济盈余”的模式。无论时间、物品、知识，只
有它们出现盈余之后才会被共享出来。所以，可以说资源过剩是一切共享经济的根
基，如果没有这个先决条件，其他都是无效的。但随着 Uber 发展，其成本结构也发生
了很大的变化。早期业余司机、闲置汽车的加入，的确避免了公司对固定资产投入，
节约了大量运营成本。但随着需求量的快速上升，很多司机实际上成为专职司机，这
也就带来了新的社会问题。例如，这将对澳大利亚的出租车行业产生重大影响，不利
于公平性竞争。不过 Uber 的合法化也有很大的好处，除了方便、廉价、能满足人们对
更高质量和更安全的服务的需求外，还起到了推动行业的经济发展的作用。由此看
来，Uber 会整体社会是产生一个积极影响的，所以它在澳大利亚合法化是一个很好的
决定。

5. Dose the uberisation suitable for all sectors? 300

Uber's success has inspired tens of thousands of start-ups, many new shared products, such as
shared umbrellas, shared power banks, shared housing and more. Entrepreneurs and investors
are excited about the enormous opportunities and potentials they have, but others worry that
the “Uberization” of the economy could turn any good full-time job into a flexible temporary
job.
In my opinion, this Uberization is not applicable in all industries. Uber's success is caused by
a series of potential factors: it is a commercial service with high frequency of consumption
and timeliness. Not all industries have such characteristics. The more complex the form of
service, the more difficult it is for consumers to accept the randomness of such service
personnel. We all have preferences about who cuts our hair, babysits our children, repairs our
furniture, or provides legal or medical services. If consumers are not buying too often, it is
much harder to keep them focused on the brand. Therefore, if people want to replicate the
Uber model, they need to carefully evaluate the potential factors of the market and the
vertical industries. Blind Uberization cannot guarantee success.

Uber 的成功鼓舞了成千上万家初创公司，许多新型共享产品面世，如共享雨伞、共享
充电宝、共享住房等。企业家和投资者为其中蕴含的巨大机遇和潜力感到兴奋，不过
也有其他人担心经济“Uber 化”会让一切优秀的全职工作变成弹性制的临时活计。

在我看来，这种 Uber 化并不是所有行业都适用的。Uber 的成功是由一系列的潜在因

素造就的：这是一项商品化服务，消费频率高，时效性强。并不是所有行业都具有这
样的特征。服务形式越复杂，消费者就越难接受这种服务人员的随机性。在选择谁来
给我们理发，帮我们照看小孩，修理家具，提供法律或医疗服务上，我们都会有所偏
好。如果消费者的购买频率不高，想要让他们保持对品牌的关注就难得多。比如，如
果消费者每年只需要清扫几次院子，他们更可能每次都重新研究一下哪家的服务更
好。所以想要复制优步模式需要深思熟虑地评估市场和垂直行业的潜在因素，盲目的
优步化并不能保证成功。

6. Conclusion 120 (4-6 sentences)

Uber is probably the fastest growing company ever. In just a decade, its market value has
climbed to $70 billion. More importantly, this company has produced a huge social
demonstration effect. For a time, the Uber model was widely copied by entrepreneurs and
sought after by investors. However, in addition to analyzing the reasons for its success,
people should pay more attention to the defects behind it.

Uber 大概是有史以来成长最快的公司。创立不过十年时间，它的市值已经攀升到 700

亿美金。更重要的是，这家公司产生了巨大的社会示范效应。一时间， Uber 模式广泛
被创业者拷贝，被投资者追捧。然而除了分析其成功的原因外，人们应该更多的去关
注它背后所存在的缺陷。

7. References
Barkan. (2017). Uber Business Model Problems Analysis & Conclusions. Retrieved from
https://ondemandstartup.com/uber-business-model/
Derek. (2018). What Is the Sharing Economy (and How Is it Changing Industries)? Retrieved
from https://www.thebalancesmb.com/the-sharing-economy-and-how-it-changes-industries-
4172234
Bill. (2015). The algorithm underlying Uber's dynamic pricing. Retrieved from
http://www.199it.com/archives/345331.html
Deloittes. (2016). Economic effects of ridesharing in Australia. Deloitte Access Economics.
Retrieved from https://www2.deloitte.com/au/en/pages/economics/articles/economic-effects-
ridesharing-australia-uber.html

1500 words