DEE elaborates a preliminary technical report about Uber’s impact

Cade’s Department of Economic Studies (DEE) released a preliminary technical report on the organization of the individual passenger transport sector. This document will serve to support the preparation of a final report, which should be published until the end of 2017.

This set of studies focuses on the expansion of the sharing economy in the individual passenger transportation market through a newcomer-oriented perspective (from the viewpoint of new suppliers, such as Uber). The report presents the current stage of the market and provides us with a brief description of the Brazilian taxi market and Uber’s entries. It also discusses some regulatory implications regarding all this matter.

According to DEE, the sharing economy offers benefits not only to consumers but to suppliers as well. Consumers gain because they enjoy certain advantages arising from the possibility of using some goods temporarily – instead of purchasing a vehicle, they can use it transitorily – in a more diverse way and with more variety of consumption (usually with lower prices). On the other hand, suppliers have an easier and more efficient access to the consumer market, what reduces significantly idle capacity.

The development of new technologies potentiates the reduction of market failures – asymmetric information – insofar as consumers start to have access to information regarding the ride itself: expected price and time duration, custom-made destination, driver quality assessment, and technical information of the vehicle.

Further steps of the research will try to analyze such variables in an econometric fashion, which measures Uber’s competitive pressure on the taxi market.

Competition rise

Moreover, the sharing economy expansion can enhance competition and may cause revenue reduction throughout traditional sectors of the economy. For example., Uber had created a new market that reached consumers who did not use taxi before. It delivered a more efficient service with lower prices, what constitutes its differentiation per se.

DEE’s preliminary technical report goes a step further and advocates that Uber has created a new demand – while competing against and also winning rivaling and conquering passengers who use online taxi platforms (such as 99Taxi and EasyTaxi).

This study is also important to draw more precise conclusions about the competitive impact of rideshare online platforms – especially Uber – on the Brazilian taxi market.

When it comes to the Brazilian taxi market, DEE has considered some sectorial aspects, such as rigid regulations, that would have generated higher social costs and the impossibility to offer discounts, for example., what has made even more difficult to compete against the new sharing economy online platforms.

In this context, DEE’s preliminary technical report has quoted that the number of taxi licenses do not usually follow the rapid growth of cities. In Brasilia (considering the entire Distrito Federal), for example., the number of taxi licenses has not increased since 1979 – albeit a population growth has been reported in the same period (more than 142% of growth between 1980 and 2015).