Uber announced last month that it plans to roll out a new feature that would allow female drivers and riders to avoid being paired with men. The feature will be piloted in Los Angeles, San Francisco, and Detroit beginning in a few weeks, the company says.
With this update, women will have a few different ways to coordinate their trips. Female riders can specifically request a female driver when requesting a trip on demand or in a reservation, or they can set a preference that will increase their chances of being matched with a woman driver. Female drivers, meanwhile, will have the option to toggle on Women Rider Preference in their app settings, which means they will only be matched with female riders.
“Across the US, women riders and drivers have told us they want the option to be matched with other women on trips,” said Camiel Irving, Uber’s VP of Operations for the US and Canada. “We’ve heard them — and now we’re introducing new ways to give them even more control over how they ride and drive.”
Though this is the first time Uber is introducing these options in the US, the company has been experimenting with female preferences in other countries in recent years. Specifically, the Women Rider Preference option for drivers was first launched in Saudi Arabia in 2019, and due to an “overwhelmingly positive” response, the company says that feature has since expanded to 40 countries, completing over 100 million trips.
A Competitive Market
Part of the motivation for this move seems to be that Uber is trying to get ahead of its competitor Lyft, which introduced a similar feature in 2023 for female and nonbinary drivers. “Unlike the Uber version, Lyft doesn’t guarantee that drivers or riders will be paired with a woman or nonbinary person; it merely prioritizes these matches,” Forbes notes. “Nonetheless, Lyft claims that 67 percent of eligible Lyft drivers have opted to use the feature.”
This is a prime example of what economists call non-price competition, where businesses compete by changing their products rather than by lowering their prices for the same product. The Austrian economist Israel Kirzner discussed this kind of competition in a 1971 lecture on advertising. “Competition takes the form not only of producing the identical product which your competitors are producing and selling it at a lower price,” he said. “…Competition means sometimes offering a better product, or perhaps an inferior product, a product which is more in line with what the entrepreneur believes consumers are in fact desirous of purchasing.”
As a business, if you can offer people a better product than your competitor for a similar price, you will gain more sales. In fact, you can even gain sales by making a slightly inferior product and offering it for a lower price, which is the competitive strategy of many discount stores.
Kirzner emphasizes that there are countless ways entrepreneurs can change their products to fit consumer tastes. “With freedom of entry, every entrepreneur is free to choose the exact package, the exact opportunity which he will lay before the public,” he says. “Each opportunity, each package has many dimensions. He can choose the specifications for his package by changing many, many of these variables. The precise opportunity that he will lay before the public will be that which, in his opinion, is more urgently desired by the consumer as compared with that which happens to be produced by others.”
The Uber app illustrates this idea well. There are dozens of features that Uber could offer, each of which would differentiate the Uber “product” from other ride-share services. But Uber doesn’t just create whatever features it wants. Its design decisions are driven by the profit motive, and thus, consumer demand. And this is an ongoing process. As ride-share companies gain data and experience, they are constantly looking for ways to improve their product so that consumers will be more satisfied.
Over time, the companies that don’t cater well enough to consumer preferences will be outcompeted by the ones that do. Thus, through a kind of Darwinian selection process, only the companies that serve consumers the best tend to survive and grow.
Given these clear benefits to consumers, one would think that policymakers would want to encourage competition in the transportation industry, along with every other industry. Unfortunately, they are often the chief enemies of competitive markets.
Government-Imposed Barriers to Entry
Through much of the twentieth century and into the twenty-first, certain municipal governments in the US have imposed taxi medallion schemes. Under these systems, taxi drivers require a medallion (essentially a license) to operate, and, critically, the number of medallions is held constant or only grows slowly. As a result, taxi medallions have been known to sell for up to $1 million.
Medallion systems are some of the most egregious examples of government-created cartels. By restricting entry into the market, they give existing medallion holders an unfair advantage at the expense of consumers and aspiring taxi drivers. “These licenses are negotiable, so that any new firm must buy from an older firm that wants to go out of business,” economist Murray Rothbard notes in his 1970 book Power and Market. “Rigidity, inefficiency, and lack of adaptability to changing consumer desires are all evident in this arrangement.”
Why haven’t these systems been relegated to the dustbin of history, given their blatantly anticompetitive effects? The Washington, DC finance office studied this question in 2009 when that city was considering a medallion system of its own. Their conclusion should not be surprising to those familiar with these kinds of policy battles.
“A taxi medallion system is nearly impossible to end even if it proves to be providing unfairly high gains to a limited number of original medallion owners,” their report concluded. “Medallion owners fiercely resist any possible threat that may challenge their advantage.”
As many will recall, this fierce resistance became particularly pronounced when Uber and Lyft first came on the scene in the early-to-mid 2010s. Taxi companies were furious that cities were allowing their monopoly position to be challenged, and some even sued their municipal governments for not placing restrictions on ride-share companies.
Ilya Shapiro and David McDonald discussed two lawsuits from that period in a 2016 article for the Cato Institute.
“In both cases,” they wrote, “the plaintiffs’ arguments more-or-less boiled down to: ‘We made a deal with the city years ago where we were promised monopoly control over this market. The government’s failure to protect that monopoly constitutes an eminent domain-style taking.’ This is, of course, as the court described, an absurd argument… No one is entitled to a government grant of monopoly power.”
In the following years, with Uber and Lyft taking considerable portions of the market, the price of medallions plunged, leading to no shortage of aggravation for those who had invested in them.
Now, over ten years since they first came on the scene, Uber and Lyft have become regular players in the transportation industry. Judging by their success, the benefit to consumers has been immense. And their continuous innovation — no doubt spurred by market forces — has been a testament to the power of competition to not only bring prices down but also to improve customer experiences.
And yet, in this world of twenty-first century technology, twentieth-century taxi medallion systems are still with us, systems that continue to restrict competition in this space.
It makes one wonder, how much more evidence of competition’s virtues do we need before we finally set it free?