About a year ago a paper (Levin et al) came out on the consumer surplus (the difference between what people did pay Uber vs the most they would have been willing to pay) generated by Uber - $6.8bn per year, in the US alone, from UberX alone. Much was made about the relative inefficiency of Uber in capturing this consumer surplus and thus making higher profits - and how we might expect Uber to do a better job of this over time by raising prices on their customers.
However, the focus on consumer surplus is missing half of the picture.
Uber does not produce anything. Uber is a, admittedly a very good and value add, middleman.
Uber can either increase its profitability by better capturing consumer surplus or capturing supplier surplus, decreasing the amount it pays drivers.
In the future we should expect Uber to try and add to their profits by capturing both sides of this wedge. Indeed the recent rise in Uber's share of fares may be the start of this.
The very publication of the paper on Uber's consumer surplus generation shows that they wish to demonstrate societal value and remain on the good side of regulatory bodies. The lack of publication of the supply side dynamics suggest the less politically sensitive constituency of Uber drivers may be the ones who will first bear the brunt of Uber's attempts to achieve profitability.
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