
Using Big Data to Estimate Consumer Surplus:  The Case of Uber - Dowwie
https://drive.google.com/file/d/0B3y6Efb4V73TdG9pV1F0VGpsM1E/view
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bertan
If you would like to listen to an entertaining version of the paper, here it
is: [http://freakonomics.com/podcast/uber-economists-
dream/](http://freakonomics.com/podcast/uber-economists-dream/)

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mathattack
Interesting that this is from the author of Freakonomics. This contains a very
popular pro-Uber conclusion:

 _Inelastic demand translates into large consumer surplus estimates: roughly
$2.88 billion dollars in 2015 for the four cities in our sample, or $6.76
billion if extrapolated to all UberX trips in the U.S. for that year. This
estimate of consumer surplus is two times larger than the revenues received by
driver-partners and six times greater than the revenue captured by Uber after
the driver-partner’s share is removed._

This certainly puts a different spin on accusations of price gouging with
surge fees.

(Note: I have no affiliation to Uber, though I am a big fan of the service)

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notahacker
It's a different spin, but 'price gouging" is by definition extracting
consumer surplus from those willing to pay more if necessary. The other way of
spinning those figures is that if consumers spend $1 for every $2.60 they're
willing to spend on Uber then Uber rides is doing an unusually efficient job
of revenue maximization compared with most other businesses, particularly
considering a large part of their brand value is being perceived as relatively
cheap.

That's particularly the case when you consider that consumer surplus is also
Uber's competitive moat against potential new entrants to the market that
couldn't compete with Uber on price; as the paper's author's point out it's a
_short run_ consumer surplus and the long run demand elasticity is likely to
be much lower.

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doctorpangloss
The most popular consumer services usually transfer the most value from
producers to consumers.

YouTube is a great example. YouTube hosts copyrighted videos and music. For
most of its history, producers weren't remunerated. Even today, a great deal
of user-generated content is reenacting or remixing conventional Hollywood IP.

Apple built a lot of iPhones with inexpensive overseas labor—HTC, Nokia and
Motorola earlier on for that matter.

Facebook gets the vast majority of the content it shows people for free, from
its own users. Crazy!

Google puts ads in front of other people's stuff. Regular search and direct
navigation ads certainly don't pay producers. I assume most content on the
internet took time, and therefore money, to make.

The producer-to-consumer value transfer doesn't always favor the mediator.
Comcast's broadband internet was a great deal at $60/mo, considering piracy.
Though in the late 90s/early 2000s people were paying for both broadband and
TV—not so much the case today.

You might say, but that's all legal! Remixing copyrighted content! My tone
might suggest that these business models depend on violating the law somehow.
I'm just describing the facts. Facts have a well-known... bias.

Factually, a lot of popular services transfer as much as 100% of the value
from producers to consumers.

Whether or not something should be illegal in there is a different question.

