It’s a strange market dynamic though — if Uber pays drivers more per mile, you’d have more people that will want to drive for Uber. This would mean fewer rides (per driver), which would cause the average take-home pay for a driver to be lower.

Which would cause drivers to leave, but everything would eventually equilibrate.

But if you also lower the per-mile rate (and total take home pay), then drivers won’t have much left over to “invest” in their independent businesses (their cars). So, the fleet will start to skew to older cars, which might start to drive away riders.

So, if you wanted to keep a steady supply of drivers, a player like Uber should want to maximize the total take-home pay for a driver, but not necessarily the per-mile rate (eventhough the two are obviously confounded).

But by and large, I completely agree with you. I can’t understand the logic behind lowering the per-mile rate for drivers. Given their inherent competition with Lyft for both drivers and riders, they should be working to keep both groups as happy as possible. Maybe they aren’t doing well and are trying to get their books in order before their IPO?

> Maybe they aren’t doing well and are trying to get their books in order before their IPO?

That's probably what it is. They're still not profitable. They might be hoping that this will tip them over the edge into profitability just before the IPO. This is a 25% cut. That's likely to piss off many drivers and make them want to do something else, but they might be counting on the fact that they have a steady supply of new drivers. The new drivers will never have experienced the higher rate.

Well it is a matter of what they are trying for - growth or profitability and how much in either direction. Amazon is an example of a success story of 'pump growth and then pump margin when huge'. What they are doing now is losing money and trying to make up for it through scale.

The sustainable equilibrium approach is the summation of profit margin x ride numbers.

> if Uber pays drivers more per mile, you’d have more people that will want to drive for Uber. This would mean fewer rides (per driver), which would cause the average take-home pay for a driver to be lower.

How so? Uber can and does control the number of drivers on their service at any given time.

The long term plan for Uber was to replace drivers with self driving taxis. They were open about this for a long time, though after the recent problems with their self driving program (killing someone), I'm not sure how on track the plan is.

I am skeptical that self driving cars will be a real thing anytime soon. Too many edge cases to worry about.