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How much Uber drivers make in each city - Business Insider - Business Insider

Discussion in 'TNC News' started by TNC News, Jul 20, 2015.

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  1. TNC News

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  2. ClevelandUberRider

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    reduced fares = more riders= more money for partners.

    I love Uber Mathematics.
     
  4. ClevelandUberRider

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    As much as I admit to the contribution they have brought to the consumers (riders), their claim of "lower fares bring in more trips which result in higher earnings for drivers" may not be intellectually honest.

    There are two ways they may be weak in their intellectual arguments:

    1. Driver's average per hour net fare earnings from Uber = rFx,
    where: r = percentage of gross fare belonging to drivers (20%, 25%, 28%, depending on driver's accounts)
    F = average gross fare pax pay per trip (not including SRF)
    x = average number of trips per hour.

    By lowering F, Uber is saying x will increase. The question is, will the increase in x compensate for the decrease in F?
    One should pay attention to how the above formula works. If the average fare (F) decreases by 50%, the average number of trips will have to rise by 100% to make the fare cuts (drivers') earnings-neutral!
    Similarly, if fares drop by 33%, to achieve (drivers') earnings-neutral effect, the average number of trips per hour must rise by 50%!

    2. Uber has been talking about drivers' earnings, i.e., net fare that Uber pays drivers. But in reality, what counts for drivers is the net income they achieve with their Uber driving. Net Income = Net Fare from Uber - Per-Mile Car Expenses. (The discussions here are simplified by ignoring all other costs drivers incur which do not affect this discussion whether in favor or against Uber. The costs ignored include non-car related business TNC business expenses such as water and mints provided to passengers, as well as car-related expenses that are fixed per year regardless of the number of miles driven, for example car registration etc.)

    Mathematically, Drivers' Net Income = rFx - yxm
    OR
    Net Income = x(rF - ym)
    where the notations from (1) above apply and:
    y = the per-mile car expense for drivers
    m = number of miles (deadhead and paid miles combined) for an average trip.

    For the math majors and/or those interested in math, you can see from the above formula (which I think was probably among the many formulas used by Uber in their brainstorming sessions) that, for such a mathematical formula, as long as BOTH y and m are positive, non-zero numbers (which in reality of course they are), then for every decrease in F (average fare per trip), to achieve (drivers') Net Income neutral effect, the required percentage increase in x (average number of trips per hour) must rise by an even larger percentage than those mentioned in our discussions in (1) above.

    I admire Travis as an entrepreneur. I admit that Travis is a tough businessman that drives a hard bargain against his drivers. But I don't like the fact that he completely disregard the possibility that a few of the UberDrivers were math or econ majors and the power of the Uber Forum.
     
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