For the system to function, you've got roughly five variables:
A: Drivers need to get paid enough to want to do it.
B: Riders need the rides to be cheap enough to choose it.
C: The quantity of drivers generally available needs to be consistently high enough that riders can find the rides they need when they want with little wait time.
D: The quantity of riders generally available needs to be consistently high enough that drivers are willing to sign on and wait to accept rides.
E: The overhead of running the business.
Profit comes from the spread between A and B minus E. But A is dependent on D: if there aren't enough riders seeking rides then drivers get fewer of them and need to make more per ride to it to be worth signing on. Likewise B is dependent on C: If they have to wait longer for rides or risk not having a driver available, they won't pay as much or choose to use the service.
The company has knobs they can turn by controlling how much they charge riders and how much they pay drivers. But because of the connections through C and D, they can't turn one without affecting the others.
And it may be that depending on their overhead and the natural density of an area, there may be no valid pricing solution that doesn't lead to the system collapsing from disuse. They have been able to avoid that up until now by infusing the system with "free" investor money, but that doesn't last forever.
A: Drivers need to get paid enough to want to do it.
B: Riders need the rides to be cheap enough to choose it.
C: The quantity of drivers generally available needs to be consistently high enough that riders can find the rides they need when they want with little wait time.
D: The quantity of riders generally available needs to be consistently high enough that drivers are willing to sign on and wait to accept rides.
E: The overhead of running the business.
Profit comes from the spread between A and B minus E. But A is dependent on D: if there aren't enough riders seeking rides then drivers get fewer of them and need to make more per ride to it to be worth signing on. Likewise B is dependent on C: If they have to wait longer for rides or risk not having a driver available, they won't pay as much or choose to use the service.
The company has knobs they can turn by controlling how much they charge riders and how much they pay drivers. But because of the connections through C and D, they can't turn one without affecting the others.
And it may be that depending on their overhead and the natural density of an area, there may be no valid pricing solution that doesn't lead to the system collapsing from disuse. They have been able to avoid that up until now by infusing the system with "free" investor money, but that doesn't last forever.