Question

The growth of ride-sharing services such as Uber and Lyft are now competitive with taxi services. Drivers for Uber and Lyft are independent contractors who work as many hours as they choose and earn a percentage of the fares set by the company. During periods of high demand, the market price of a ride increases. Is this a perfectly competitive industry or is it closer to a monopoly? Explain your answer

Answer 1

Prior to establishment of Uber and Lyft, the taxi industry used to serve in a monopoly. With the arrival of Uber and Lyft, the taxi industry has transformed into a perfectly competitive market. The taxi industry fufills few conditions of perfectly competitive market:

1) Larger number of buyer - The number of buyers is quite high.

2) Homogenous product- A person drives you where you need to go. The products a pretty homogeneous.

3) Well-defined Profit rights - Yes, There are well defined property rights.