market clearing pricing strategy used by Uber

 

This will be a continuation of the topic of market clearing pricing strategy used by Uber, along with its other dimensions such as the sharing economy.

In the previous discussion, we considered a situation where Uber can charge a price greater than a traditional cab price for the same trip. In this case, let us consider when Uber charges a market price lower, relative to the Dallas based Cowboy Cab.
1) Assume Mr. Smith is a Dallas local and loves to support local producers. Thus, he gains a higher marginal utility (benefit) when he consumes Cowboy cab compared to Uber. However, consider:

MUCowboyCabPCowboyCab

 

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