Report says Uber surge pricing has a twist: some drivers flee
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When we filed a patent it was mostly to protect ourselves against other people suing us for violating their patents. The entire system is fundamentally broken.
Thinking it though, it may work, but there is a potential problem. You're suggesting you expand the supply side in a surge by ensuring the the driver makes more money. So that means the company makes more profit during non-surge. But doesn't that open up an opportunity for a second company to come along and charge lower rates during non-surge periods?
Get rid of any incentive to act in the customer's best interest: Make sure that no drivers are compelled to go to less desirable areas, do a shift change right at rush hour, allow drivers to reject the rides they don't want, create no feedback loop, allow cash payments so they can pretend like the credit card machine is broken for extra tips, allow drivers to rip off visitors who don't know the area by taking longer and less direct routes, and don't increase the number of medallions ever.
There are other explanations / scenarios of course. I have a degree in economics, and, well, respectfully this seems more like a business/marketing domain issue. The change I was proposing would be at the same time too small of a price change and too muddled with other (real world, real time) variables to be well-modeled in the realm of economics.
Not sure about the low price elasticity. The article argues that demand for uber-rides varies drastically with price.
Economics dictates as demand goes up and supply remains the same the price should go up. Once either supply goes up or demand goes down the price goes down. Uber is literally modeling economic theory.
1) You're limited to a surge rate of ~1.25x, no more. (Maybe a few more percent if you pass through the safe rides fee.) Edit: and, per sibling, you're giving away business if you increase general rates.
2) You're giving up the extra profits you'd make at the very times when your product is most profitable and valuable, crippling the business model. It would be like if Facebook waived the price differential between general vs targeted ads.
Uber advertises surge pricing as a strategy to incentivize^H^H^H^H^H^H^H^H encourage drivers to become available in areas with high demand.
But if the study's results reflect reality, the surge pricing does not encourage drivers to go to high-traffic areas, it simply drives demand down until it is aligned with the supply of drivers in the area. Driving demand down also discourages drivers from working the area, and thus some actually leave, lowering supply further.
Is that bad? It depends on how you feel about companies being honest with customers. A more accurate message on the app might be "Demand is through the roof, but there are only enough cars for those who need a ride so much that they are willing pay 1.5x the normal rate. Hurry before there are even fewer cars and the surge price raises to 2x."
Likewise, if you feel companies should be honest with their subcontractors, the message for drivers ought to be "Demand in this area is through the roof, and the lucky few who will get riders before we drive demand down, will earn 2x the normal rate. The rest might not get any riders at all, as riders make other plans or flee the area."
According to the article, they are working on tools to help drivers with the latter proposition, but not the former.
If you consider the price changes "dishonest", how do you feel about every other price change in the market? The problem with arguments against surge pricing is that they almost always become fully-general counterarguments against the very concept of a pricing system.
[1] If I said "not-A OR B", would you say, "It would be more honest to say 'A implies B'"?
Wrong: "Apples are 10% off this week."
Right: "Apples are 10% off this week, indicating that suppliers are generally willing to offer lower prices for apples now and in the near future, so they should redirect near-term production away from bringing them to market, and consumers should look for marginal uses that they can substitute apples into, like snacks or pies."
That's pretty much unexpected anywhere else.
I've heard that Lyft has since moved to a model where they take a percentage of the surge price, but I can't seem to find any obvious sources corroborating this.
Uber AFAIK has always taken their cut of the surge price.
> It analyzed what happened when a glitch caused surge to stop for 26 minutes in New York City on New Year’s Eve, Uber’s busiest night of the year.
Hmm. Call me crazy, but this exposes a pretty glaring hole in Uber's model: the inability to hail a car by hand. If - at some point far, far in the future - cabs become obsolete, how will you get a ride when either your phone is dead or the Uber network no longer responds?
Unrelated: is it possible that at some point unscrupulous drivers might try to pick up riders late at night in popular areas just by claiming they're Uber, or having an Uber sticker of some kind on their car?
This is precisely the privilege a medallion gets you.
If you want to preserve this ability in those select places, those cities should grant dirt cheap licenses to any driver who passes a background check (or whatever) and allow those folks to put a taxi light on top of their car. If you keep it cheap, then most drivers in those areas will get a license so they can easily supplement their electronic hails with street hails.
Of course, if taxis are gone, one wouldn't be able to do that now in lots of places. But for how long do you expect passenger transport to go with no competition?
far in the future, phones won't ever be dead, unless you are dead. They'll be tiny, and powered by bodyheat or ambient heat or ambient radio waves or something.
So this isn't a concern.
This already happens in NYC with some regularity.
https://consumermediallc.files.wordpress.com/2015/10/chen-im...
This is a great rationalization that can be trotted out at any time for a variety of reasons. That we, as the customer, have no visibility into "what is going on with the drivers" is an issue that needs to be addressed.