An article in the Wall Street Journal in 2019 discussed the fact that ride-sharing firms Uber and Lyft were suffering losses. The article noted that to eliminate these losses, “numerous investors in both companies, former ride-hailing executives and academics who study the market believe Uber and Lyft will ultimately need to raise fares.” But the same article noted that in late 2018, Lyft began offering discounts that Uber then matched. The article also noted that under the federal antitrust laws, “the two companies aren’t allowed to coordinate on fares.”
a. What does the article mean by “coordinating on fares”?
b. Even if they cannot legally coordinate their actions, if Uber and Lyft can’t become profitable without charging higher fares for a ride, why don’t they do so? Use game theory in your answer.