Tacit Collusion

Small Number of Firms in an Industry

"Tacit collusion depends on the sending and interpreting of signals of intent to cooperate."

Of of the big keys to the growth of Lyft was the inability for taxi companies to rally around each other to try to prince them out of the market. There isn't one taxi company in a given city, there are sometimes dozens. When an outsider came into the picture to rock the boat of their industry, they couldn't leverage any sort of collusion in pricing to move the needle.

According to an article in the International Business Times:

"Customers riding with Uber and Lyft will spend less than they would on the same ride with a taxi almost all the time, except in the hours that the transportation companies have surge pricing in effect. That’s the result of a new study from What’s the Fare, a site meant to help customers determine once and for all the best way to get around. The study comes after Uber and Lyft, themselves rivals, have spent years sparring with the taxi industry and local regulators over their right to ferry customers through urban areas. There are a lot of factors at work, the researchers concluded, so a customers’ best bet is to compare their options before ordering a ride. While collectively ride-sharing services are almost always cheaper than taxis, individually there’s more variability,” What’s the Fare creators Matthew Liu and Jonathan Goldman wrote in a blog post announcing their results. “In Los Angeles any of the ride-sharing services are cheaper than taxis over 95 percent of the time. But in San Francisco and New York, UberX only winds up cheaper than a taxi three out of four rides, and Lyft is cheaper 72 percent and 64 percent of the time, respectively.”

Now, Lyft has been able to secure its place in the industry

Market Uncertainty

"The extent to which managers understand how a new product or service will be received in the market."

I mentioned in an earlier blog post about how market entry can be very frustrating for Lyft. That does not necessary hold true for market uncertainty. When the company makes a decision to move into a market, the downtown crowd will usually keep the company moving in a positive direction. Usually the organization is focused on a metropolitan area with access to a major airport to keep the customer base up.

The problem again is when the government decides to get in the picture. From a New York Post article:

"Uber, the taxi-hailing app, continued its recent string of bad news this week when it a Nevada judge ordered it to stop doing business in Sin City — and the rest of the state. So apparently prostitution, legal in the Silver State, is OK, but Uber is way too risky. The Nevada ruling comes 48 hours after Uber — and rival Lyft — were banned from picking up passengers at the Louisville (Ky.) Airport.. "

The Relationship Between a Firm and Its Customers

Product Mix

"The way by which products are customized for different customer applications."

Lyft has usually been setup so that each customer gets a completely random car and driver. Last year, the company announced the following:

"Today, we unveil Lyft Plus, a fresh and modern transportation experience with lower prices and higher capacity than current premium options. You can now request a sophisticated, custom six-seater just as you would any other Lyft ride. It’s the most versatile option available anywhere. Enjoy Lyft Plus on a date or a night out, on your own for maximum comfort, with clients on a business trip, or when traveling with your five best friends."

This gives customers the sense of customization and the ability to get a personalized type of ride. There have been rumors about them having an option to select the specific car you are choosing if you have a number of options in a given area. There are a lot of issues with that model, but it looks like Lyft is moving in the right direction.

Worker Motivation

"As workers become more cogs in a machine, worker motivation wanes, and productivity and quality both suffer"

From an article on CNN Money:

"The way Lyft is making passengers aware is by putting the vehicle's base ID on its picture on the app, per TLC requirements. In practice, the average passenger would not notice.
The TLC is considering revising its rules because the field of black car services has changed so dramatically. The landscape of ride-on-demand apps has become increasingly crowded, with services like Hailo, Sidecar and Gett developing followings. Uber, with its $18.2 billion valuation, is by far the biggest. One driver described his process: "I got a tablet, my phone and my Uber phone...when I have no passengers in my car, I turn on all my applications and whichever one gives me a job first, I take."

One of the biggest issues facing Lyft is securing driver loyalty. Most people that are doing the driving really don't care who they are driving for. As we look at human capital as such an important part of an industry, the company needs to start locking down their good drivers who see themselves as a mercenary for hire.