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Uber's Demand Curve Is a Breakthrough for Users and Economists

Uber users are getting massive amounts of value from the service, according to a new analysis only possible in the post-transportation network company era.
September 25, 2016, 9am PDT | James Brasuell | @CasualBrasuell
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"Uber has created more than a booming ride-sharing market," according to an article by Adam Creighton. "It’s given economists a treasure trove of data to understand one of the fundamental concepts of economics: the demand curve."

Steven Levitt, author of the best-selling Freakonomics, along with other researchers at the University of Chicago and Oxford worked together with Uber to map out the Uber demand curve, "showing U.S. consumers alone are reaping billions of dollars a year in benefits, far greater than the losses borne by taxi owners."

Such a demand curve was considered "nearly impossible," writes Creighton, until Uber came along. Uber's platform allows the collection of data on a number of the variables that make demand so volatile (i.e., price changes alone don't account for why people buy goods or services):

Uber’s data is unique in two crucial ways. It records not only the time, place, price, and demand-and-supply conditions of every paid ride (encapsulated in a surge factor), but also of every occasion where a customer declines the offered price.

Click through to the article to find out exactly how the new research quantifies Uber's demand curve, along with the implications of the new research on another tricky economic concept: consumer surplus. 

[The Wall Street Journal could be blocked by a paywall.]

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Published on Monday, September 19, 2016 in The Wall Street Journal
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