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