Price wars are welcomed by consumers when they appear and resented when they go away.
(Bloomberg) — Uber Technologies will drop prices in 80 North American cities on Saturday. The ride-hailing company hopes the move will increase demand in a seasonally slow month.
Uber said it will cut prices in Los Angeles and San Francisco by 10 percent, Houston by 20 percent, and Richmond, Virginia, by 15 percent. Prices in some cities, including New York and Chicago, will remain unchanged. Fare reductions will eventually be extended to 100 cities, the company said. “We believe in price cuts when demand slows down,” said Andrew Macdonald, a regional general manager for Uber.
Lower fares mean that drivers make less per ride. Uber said lower fares will attract more riders, which should increase the number of trips per hour. “We care deeply about driver earnings,” Macdonald said. “We actually find that a lot of drivers understand why we do this. They’ve been through price cuts before.”
If the change doesn’t work out the way the company plans, Uber said it will guarantee that drivers receive a certain amount of money per hour in most of the cities where prices will be lowered. The amount guaranteed varies by city and depends on the time of day. “What this does is stabilize earnings for drivers while the cuts kick in,” Macdonald said.
Last year, Uber dropped Seattle prices in January, but the demand didn’t increase enough to make up for the price cut. So Uber restored prices. “We’re a very experimental company; we don’t always know how a market is going to react,” Macdonald said. “Because of our commitment to roll back if it doesn’t work, by its nature it’s somewhat temporary.”
This article was written by Eric Newcomer from Bloomberg and was legally licensed through the NewsCred publisher network.
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