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Why a boom in ridesharing apps could be a boon for riders

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Uber and Lyft dominate the market, and that isn't always to the benefit of the consumer

After rising regulations prompted both Uber and Lyft to pull out of Austin in May, half a dozen alternative ride-sharing apps sprang up in their place. The smaller companies offer a new range of prices and business models, as the competition now takes place on a more even playing field. One company, Juno, even offers its drivers equity in the company.

In the world of ridesharing, competition and innovation could be a boon for riders, according to a recent article by City Observatory. Like previous examples of new technology changing modern life, such as the telephone or computers, monopolistic practices can create a winner-takes-all situation that doesn't always benefit the consumer.

In the startup realm, being the first and biggest creates a cascade of benefits that often mean big bucks. In the case of Uber, the company’s industry dominance has lead to a valuation of roughly $70 billion because economists assume that Uber’s monopoly-like position will eventually reap high profits.

While the company says its drivers are independent contracts and so, they can’t possibly have a monopoly, many argue that the uniform fares set by the app amounts to price fixing. In short, Uber doesn’t give drivers the ability to set their own rates or bargain with riders, and allowing this flexibility in the market can lead to consumer benefits.

Uber’s dominance in most cities prevents lower-cost competitors from gaining a foothold, stifling businesses that may be able to offer customers cheaper rides or a better experience.