Case study

| January 30, 2017

Question
Part B: Case study (1000 words)

(20marks)

The objective of the case study is for you to analyse an aspect of economic activity and to apply some of the key concepts and theories we have studied in the course so that we can understand what happens in that situation, and the challenges for government policy.

In this case study, you are required to analyse the economic impact of the entry of Uber into the Melbourne taxi market. As a starting point, refer to Attachment 5 ‘The economics of Uber’ and then consider the following questions.

Some questions you could consider in analysing the economic impact of the entry of Uber into the Melbourne taxi market are as follows:

What is the present market structure for taxi services in Melbourne? Are there any relevant barriers to entry?
What is the likely effect of the entry of Uber on the structure of the taxi market, price of taxi rides, availability of rides and profits?
What is the basis of Uber’s advantages, if any, over existing taxi services? What is the basis of Uber’s pricing strategy?
What are the likely benefits and/or costs of Uber for consumers?
What is the basis of existing Taxi drivers’ objections to the entry of Uber into the taxi market?
What are some of the challenges of the entry of Uber for government regulation of the taxi industry?
Some important factors that will be considered in marking the case study:

a) Research – For example, does the case study display sound and extensive research?

b) Knowledge of economic concepts – Have appropriate economic concepts been used? Does the answer show a thorough understanding of those concepts?

c) Quality of analysis and application of economic concepts – For example: Is there a logical and thorough supporting argument or description of how conclusions have been drawn? Have economic concepts been applied in an effective manner in the particular application? Are assumptions clearly described? Is there an understanding shown of any relevant qualifications to the conclusion?

d) Presentation – For example: is the writing style and organisation of material such that the main ideas and arguments can be understood?

Attachment 5

The economics of Uber

by Sergiy Golovin, Bruegel, 30th September 2014

http://www.bruegel.org/nc/blog/detail/article/1445-the-economics-of-uber/

‘Uber, a San Francisco company founded in 2009, is currently one of the fastest growing startups worldwide. In 2014 its estimated valuation reached 17 billion USD, up from 3.5 billion USD a year earlier. The idea behind Uber is sim ple. Potential passengers can download a smartphone app that allows them to request the nearest available Uber car. But unlike a traditional taxi company, Uber does not operate its own cars. Instead it signs up private drivers willing to provide rides to paying passengers and passes the ride requests directly to them. Effectively Uber works as a matching platform for passengers and drivers and makes money by taking a 10-20% cut from each ride. The drivers can work in their leisure time and have to maintain a good rating, which is given by passengers after each trip.’

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