Competitive Rationalization in the Ridesharing Industry

How competitive rationalization in the ridesharing industry by the combined efforts of Uber and Lyft offer a path to profitability

Source: Casey Botticello of Passion Economy Guide

What is Rationalization in Business?

Rationalization in business is the elimination of waste and inefficiency in the industry by the combined efforts of the industry. Competitive rationalization eliminates cut-throat competition by establishing co-operation between the producers or leaders of an industry.

Why does competitive rationalization in the rideshare industry matter?

Simply put — competitive rationalization is a key step toward dueling rideshare companies working together to achieve profitability.

In the case of Uber and Lyft, competitive rationalization means that Uber and Lyft are less aggressively competing for drivers from a shared pool.

Consequently:

• Drivers will begin to earn less through decreased financial incentives to sign up;
• Uber and Lyft are taking steps toward achieving profitability;
• and ultimately, shares in Uber and Lyft should now begin to rise in price.