Question
hi could u pls read this question and read through my answer to see if it makes sense? i just need clarification! Consider the market
hi could u pls read this question and read through my answer to see if it makes sense?
i just need clarification!
Consider the market for delivered meals before the introduction of Uber Eats (and other similar services). Was the introduction of Uber Eats a Pareto improvement? Explain why or why not. You may wish to support your answer with a graph, but this is not required. If your answer is "no", explain whether it would be possible to design a way to introduce the Uber Eats service in a way that leaves everyone at least as well off (in terms of economic surplus) as they were before. (Note: You can be the "dictator" in this hypothetical, meaning that you can organise Uber Eats, allocate resources, direct payments, etc., however you see fit.)
- Pareto improvement is a situation where goods can be reallocated to make at least one party better off without any other party worse off. Pareto improvement can be understood as a behavior, which transits a market into pareto efficient. Hence, this means pareto improvement will continue until pareto efficiency is reached. The introduction of Uber Eats is a Pareto improvement because it did not result in the demise of other food-delivery platforms. In fact, a research revealed that Australians are spending over $2.6 billion every year on food delivery apps such Uber Eats and Menulog. Takeaway sales grew by approximately 18 percent in three years. (Delaney et al., 2021) It can safely be drawn that at least one in three adults living in Australia are food delivery users. The goal of pareto improvement is to distribute goods or services in a manner which satisfies everyone to be able to reach a pareto efficient state to prevent market failure. Statistically, Uber Eats and the food delivering industry do not face market failure. The implementation of food delivering services such as Uber eats improves the industry itself without harming others. Uber Eats contracts with restaurants and delivery partners to provide food for customers through their app. It could be seen as a win-win situation for both the producers and consumers as customers get their food delivered to their home at a comparable price. Whereas, restaurants and delivery partners receive fixed commission in exchange for their services. Despite the overall industry growth, fewer customers are loyal to a single service. This opens rooms for other delivering companies to compete with Uber Eats. More restaurants will be able to form exclusive delivery partnerships with different delivering companies. Customers will be able to hop between apps to cover all their favorite takeout spots at the comfort of their own home.
- All in all, Uber Eats' market is surplus-maximising as all of the surplus is catered toward someone, either their producers or consumers. Any redistribution would affect a party in the market badly.
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