Living in Chicago, I have several options for getting around beyond the public transit system. If I am going to work in the early morning before my regular bus line is running, or if I work late, I often use Hailo–a service that allows me to hail registered Chicago cabs, track their location as the arrive, and pay electronically via an app on my iPhone.

However, in Chicago and many other metropolitan areas around the country, you have additional transportation options. Several startups offer “ride-sharing,” where you book a ride with someone who’s driving their own personal vehicle. Among the most common are Lyft, UberX and Sidecar, and they are in the midst of a price war.

According to an article, the latest promo is from Lyft, which has announced “Happy Hour” discounts of 10% to 50% during periods of low demand. This follows Uber’s move earlier this year that lowered the price of its UberX service by up to 30% on a trial basis in some cities.

The lowering of fares for ride-sharing is on contrast to “surge pricing” services such as Uber uses during periods of peak demand. Uber has faced strong criticism for its “surge pricing,” especially at New Years, when some customers were complaining of paying several times the normal rate for black car service (with Uber you can hail a “traditional” tax, a black car limo or a ride-share). In a response, Uber’s chief executive, Travis Kalanick, wrote on his Facebook page that “We do not own cars nor do we employ drivers. Higher prices are required in order to get cars on the road and keep them on the road during the busiest times. This maximizes the number of trips and minimizes the number of people stranded. The drivers have other options as well. In short, without Surge Pricing, there would be no car available at all.”

Ride-sharing has also come under fire in some cities because the drivers are not licensed cab drivers, are not required to go through the same training or vehicle inspections, or carry similar insurance plans are licensed cabbies. In San Francisco on New Year’s Eve, an Uber driver hit three pedestrians, including six-year-old Sophia Liu, who later died. Uber immediately went on the defensive, pointing out that the driver wasn’t carrying an Uber passenger at the time of the accident.

In my native Chicago, ride-sharing is being contested by old-school cab companies, who complain ride-share drivers don’t have to play by the same rules. This has led city lawmakers to propose resolutions requiring ride-share companies to follow the exact same rules as cab companies, in effect ensuring a monopoly by the old guard companies and protecting their bottom line, all in the name of consumer safety.

In a city where finding a cab on a cold or wet day, or during rush hour, is an exercise in patience building, I’m hoping some balance can be struck between the next generation ride-sharing companies and traditional cabs that protects public safety while encouraging competition.

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Wayne Thorp

Wayne A. Thorp, CFA, is a vice president and the senior financial analyst at the American Association of Individual Investors (AAII). His primary responsibility is to oversee AAII's content strategy. He is also the program manager for AAII's Stock Investor Pro fundamental stock screening and research database program and is on the advisory boards of AAII's Stock Superstars Report and Dividend Investing newsletters. He holds the Chartered Financial Analyst (CFA) designation and is a 1997 honors graduate of DePaul University in Chicago. Wayne's interests include stock screening, technical analysis and charting, social media and tech gadgets. However, in the summer he'd prefer to be hip-deep in northern Michigan's Manistee River fly-fishing for rainbow trout. He is also a rabid University of Michigan and Detroit Red Wings fan.

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