That's such a terrible strategy I can't believe that's really what they're doing.
The short term problem is that they can't burn through money long enough for it to work. The barrier to entry to create an Uber or Lyft competitor is very low - anybody with a car and a laptop can create a viable Uber competitor. Nobody's doing it because Uber, Lyft, and taxis are everywhere, but when there's only Uber, and they're suddenly expensive, they'll get disrupted just like taxis did.
The long term problem is that even if they succeed, purposely creating a monopoly and then raising prices is illegal. It's a great way to get in even more trouble with the government.
The local startups are going to kill them. Juno is so much better in NYC. Nobody misses uber in Austin with Fasten and Fare. Each major city will beat Uber with their own local competitor with better service and better driver relationships.
It's not trivial to make an Uber clone, bit it doesn't take a 20 man developer team two years, either. The basic technology is not super complicated. You can do it with maybe five or six developers in a reasonable time frame. Most of the really interesting stuff that Uber does is scale, and you won't have to deal with that.
Source: was principal server engineer for flywheel, an Uber competitor.
That's a dumb metric. Now, let me be the first to say that Flywheel wasn't very successful in competing with Uber (and there are tons of reasons for that that I could expand upon if anyone is super interested).
But we were plenty successful in creating a system in which people who wanted to get a ride were able to hail our drivers and our drivers could come and pick up the passengers and they could cancel and see ETAs and so forth. We served hundreds of thousands of rides while I was there, and presumably more in the two years since I left.
They've went through periods where in some cities (plus I think they always did this in China) they would pay the drivers more than the customer would pay in order to boost both driver and rider numbers.
The short term problem is that they can't burn through money long enough for it to work. The barrier to entry to create an Uber or Lyft competitor is very low - anybody with a car and a laptop can create a viable Uber competitor. Nobody's doing it because Uber, Lyft, and taxis are everywhere, but when there's only Uber, and they're suddenly expensive, they'll get disrupted just like taxis did.
The long term problem is that even if they succeed, purposely creating a monopoly and then raising prices is illegal. It's a great way to get in even more trouble with the government.