Economics of Uber..

I did not know what Uber is till it was banned in India.

Sergiy Golovin of Bruegel writes a superb primer to understand why so many countries are banning Uber. The Indian reason is very different from other countries. In other countries, the taxi companies are lobbying to get Uber banned as it eats their business.

Uber’s business model is still fairly novel. Yet such new “sharing” business models use previously underutilized resources more efficiently, increase competition in the markets and provide consumers with more choice. However, as the ongoing debate shows, these innovations may strongly disrupt existing markets and their success may depend on the willingness of regulators to open markets for competition. Meanwhile, regulators will have to face several challenges, including balancing the interests of consumers and incumbents, creating efficient rules for the “sharing economy” and fostering competition.

Regulation will have to be quickly adapted to the changing realities of the market. The Internet and further developments in ICT increasingly reduce the costs of search and matching, eliminate the information asymmetries with the help of rating systems, provide greater transparency of prices via real-time auctions and enable entry by smaller entrepreneurs. These developments not only increase the competition in the markets and bring them closer to scenarios with perfect competition and information, but may also make certain regulations obsolete.

Nice to know..

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