Rideshare apps benefit hugely from network effects. All the drivers want to be on the app with the most passengers, and all the passengers want to be on the app with the most drivers. If Uber is the most popular, everyone will want to use Uber, and this will naturally lead to a monopoly. This is pretty bad–once Uber is a monopoly, it can take huge cuts of drivers’ revenue, let its app get slower and slower, fail to introduce new innovations, but the network effects will make it really hard for a new, better rideshare app to succeed. So this seems like a case in which government intervention in the rideshare market might be justified.
For instance, we could make a list of Official Government-Sponsored Rideshare Services, and pass a law saying that for any ride you want to take, you are required to use the rideshare service that gives you the lowest price for that ride. This kind of makes sense, right? It helps the smaller rideshare services and keeps any of them from becoming a monopoly. And price is really the main thing you care about when getting a ride. No one really cares if your car has a pink mustache on it. (Does Lyft even still do that?)
Imagine if that’s what we did.
Rideshare services would proliferate, and in the name of fairness, the government would sanction them all. Let’s say there are 13. You’d need 13 apps on your phone, and you’d need to look at them all every time you wanted to go somewhere. Oh, of course you could use the official consolidated rideshare app, which shows you prices from all 13 companies. But unsurprisingly, it’s kind of slow and shitty, and none of the serious rideshare customers use it.
All the services start charging monthly subscription fees for their apps, and you pay the fees grudgingly, because hey, if you need a car right now you need to know what the prices on all 13 apps are. In some sense each of them is now its own monopoly: Uber is the only one (besides I guess the official consolidated app) you can get Uber prices from.
All the apps have different speeds: a lot of the time you’ll try to get a ride on whichever one looks like it has the best price, and after loading for a few seconds it will inform you that nope, that driver has already accepted a ride with someone else.
To further incentivize competition, the government decides to pay rideshare services based on the percentage of time they have the best price for any given ride. Midwest, generally considered the sketchiest rideshare service and known for their dedication to making money without ever actually giving anyone a ride, loves this rule. They propose a change to their matching algorithm that allows drivers who offer rides on Midwest a last chance to decide, once someone accepts their ride, whether they actually want to give that person a ride or not. They say this rule will be good for drivers and protect them from unscrupulous customers. You suspect they just want drivers to offer prices that are too good to be true and cancel whenever anyone actually accepts a ride, in order to increase the amount of money they get from the government for having the best prices.
All I’m saying is, US equity market structure is weird.