Jaipuria Institute of

Management,
Vineet Khand, Gomti Nagar
Lucknow – 226010

Academic Year 2021-22

Batch 2021-2023

Trimester 1st

Programme PGDM
(PGDM / PGDM-FS / PGDM-RM)

Name of Course Managerial Economics

Section D

Name of Faculty Professor Aviral Kumar Tiwari

Nature of Submission Online Assignment on Moodle

(Assignment / Project Report)

Topic of Assignment / Project Case Study on OLA-UBER

Deadline for Submission 25/10/2021 23:55

Maximum Marks Allotted 10

Date of receiving at PMC: Signature of PMC Staff:

Penalty [Marks to be deducted (if any)]:
 INTRODUCTION

 UBER
Uber Technologies Inc. (UBER) is one of the most exciting firms to emerge in
the last decade because of its tremendous expansion and continual controversy.
The worldwide ride-sharing software, which was launched in 2009,
revolutionised modern transportation and rose to become the world's most
valuable private startup company at one point.

Uber went public on May 9, 2019, ten years after its start. Uber is still a key
player in the ride-sharing industry, despite its rough route. Uber reported $1.1
billion in net profits, $3.9 billion in sales, and 1.5 billion journeys on its
platform in its most recent quarterly financial report for fiscal year (FY) 2021.

 OLA
Ola Cabs (stylized as OL) is an Indian ridesharing firm that provides services
such as vehicle rental and food delivery. Bengaluru, Karnataka, is the
headquarters of the company. Ola was valued at around US$6.5 billion as of
October 2019. [3] The company is owned by a number of venture capitalists,
including Softbank.
Question1: Comment of Market structure of taxi market in India,
Compare past and present structure of taxi market in India to reflect
demand determination and changing use of taxi services in reference to
willingness, desire and ability of Indian consumer’s.

Ans:
 Due to the constant disruptions produced by technology and innovation,
India's taxi business has witnessed a profound transformation in the
previous 7 years. The arrival of new app-based taxi services, dubbed Cab
Aggregators, took regulatory authorities off guard because the cab
aggregators did not come under established regulatory structures at the
time.
 When Ola (a domestic online cab aggregator) and Uber (a worldwide cab
aggregator) first entered the Indian market in 2010 and 2013,
respectively, there appeared to be no legislative framework in place to
oversee digital cab aggregators.
 When a woman traveller reported molestation by an Uber driver in
December 2014, the regulatory lacuna in India with relation to online cab
aggregators became apparent, and the topic of assigning accountability
for similar instances arose. India's central government issued an
immediate warning to states about the dangers of permitting unregulated
internet cab aggregators to operate. The Ministry of Road Transport and
Highways (a central government body) released an advise in October
2015 concerning 'Licensing, Compliance, and Liability of on-demand
Information Technology based Transportation Aggregators' (i.e. online
taxi aggregators) operating under India's jurisdiction.
Question 2: What is role of price determination in changing market
scenario?

Ans: In a market economy, the price of items is critical in determining how

efficiently resources are distributed.

 Price serves as a warning system for shortages and surpluses, allowing

businesses and consumers to adjust to changing market conditions.
 When a product is in short supply, the price tends to climb. Rising costs
stifle demand and push businesses to try to boost supply.
 If there is a surplus of a product, the price will tend to reduce. People are
more likely to buy when prices are lower, and businesses are more likely
to strive to reduce supply.
 Prices aid in the redistribution of resources from low-demand items to
higher-value goods and services.
 The market's 'invisible hand,' according to Adam Smith. This 'invisible
hand' uses price fluctuations to move resources to where they are
required.

Although price has a significant impact on the economy, it does have some
limitations.

 The price of commodities does not reflect the full social cost / benefit in
the presence of externalities. As a result, a free market might result in
either under- or overconsumption.
 Inequality. Price facilitates the allocation of resources to the most in
demand locations, yet it may result in an unequal distribution of
resources. In a draught, for example, the market price of water may
skyrocket to the point where people are unable to drink enough. In this
case, rationing – rather than efficient distribution – might be more
suitable.
 Monopoly. High prices in a monopoly may not indicate shortages, but
rather monopolistic power, resulting in allocative inefficiency.
Question 3. In commercial taxi market what role is played by technology
and is it enhancing competition or Killing competition with reference to
pricing

Ans:
 CONVENIENT AND CASHLESS
e-hail app users may hail a car from any location and have it arrive in minutes,
rather than chasing down a cab on the street or contacting and waiting for a car
service. Uber isn't even required to inquire for your address. It is aware of your
location.
No cash is exchanged because the passenger's credit card is tied to the e-hail
account. The driver pulls over to the side of the road when they arrive at their
destination, and the passenger exits the vehicle and walks away. A receipt is
emailed to you, along with links to rate and tip the driver.

 PROFESSIONAL SERVICE
Uber and its competitors employ their own drivers, who appear to be motivated
to keep their vehicles clean and well-maintained. Late-model compacts, not
junkers, are the cheapest options. Riders enter their desired destinations using
the app, and drivers utilise navigational software to get there. It's improbable
that you'll make a mistake.
The drivers are generally courteous and articulate. They will never refuse to
take you to a specific location. Before they accept your call, they don't even
know where you're going.
Is it possible that this is a case of damning with faint praise? That is dependent
on whatever city or places you are used to taking taxis in.
Passengers are given the opportunity to review the driver's performance, which
helps to weed out unprofessional drivers. A driver will be forced out of Uber or
one of its competitors if his or her rating is regularly low.

 COMPETITIVE PRICING
A definitive or average price for an Uber is tough to come up with. Its pricing
strategy differs by city, and the surge pricing model modifies prices on a regular
basis based on demand. Uber is normally cheaper for longer rides, while short
excursions can be more expensive. And the vast majority of Uber journeys are
brief. 4 So, while an Uber ride from the airport to a suburb should save you
money, a mile-long trip across a neighbourhood might be cheaper in a cab, and
definitely cheaper by bus or subway. Uber and Ola surge pricing models can
result in significantly higher prices during peak hours.
Price Competition's Negative Effect:

Any industry can be harmed by price competition. Uber and Ola are
increasingly competing to provide the cheapest service. For both clients and
drivers, they are in direct competition with one other as well as traditional taxi
and vehicle services. Average earnings are being pushed down by competition
from rival ride-sharing services and the constant employment of new drivers.
This means that drivers must work longer hours to earn the same amount of
money as they did a year or two earlier.