When surge pricing hits, your wallet takes a thrashing
ldstephens.me
ldstephens.me
Restaurants already have different breakfast/lunch/dinner menus with similar items but different pricing.
Restaurants already charge different prices depending on whether you use a delivery service or order in person.
Restaurants already do weekday discounts, late night/clearance discounts, and "surge pricing" for special event days.
Restaurants already have coupons, "dollar" menus, loyalty cards and several other ways to implement price discrimination.
Nothing about Wendy's plan is new or surprising.
Surge pricing makes every single commercial interaction into a negotiated decision. The companies usually do it algorithmically so it costs very little; it's the customers who bear the brunt of the invisible transaction cost, by constantly forcing fresh re-evaluations of the transaction.
How are you going to "fight back" with price data? If you shift your habits to buy when the price is low – that's what they want you to do! A restaurant is far more efficient (read: profitable) when there is a steady stream of customers all day long, rather than having nobody in the place at 3PM and then a flood of people at 6PM. If a lower price can compel you to eat at 3PM instead of 6PM, that's a win for them.
This is the approach I take. I don't think of it as "fighting back", though, as my goal isn't to change the bad behavior of companies. That's largely impossible.
Instead, it's just a stance of pure self-protection. The only way I can protect myself against bad companies is to not engage with them at all.
It also means "we charge less if you are flexible"
Done right, I generally see dynamic pricing as a positive thing, generally more fair than a fixed price for a given amount of profit for the company implementing it.
Here is the idea. Let's say a company offers a service for $50 during rush hour, $10 otherwise, the alternative being a $30 flat fee. In order to get off rush hour, you need to wait for an hour. On a flat fee model, you also have to wait 10 minutes during rush hour. Not let's say your time is worth $15/hour, you can wait an hour, and the service would have cost you $25 or 1h40 of your time. Now let's say you are richer and your time is worth $100/hour, you don't want to wait and pay these $50, that's 30 minutes worth of your time. Had it been a flat $30 fee, the $15/hour guy would have spent 2h10 worth of his time, while the $100/hour guy would have also spent also about 30 minutes worth of his time (including the 10 minutes wait).
So, total value, the $15/hour guy got it cheaper, while the business and the $100/guy got even.
I don't, because it makes it impossible to know what things cost until you are at the point of purchase. I see dynamic pricing as companies being actively hostile to their customers, and so avoid doing business with ones that do this.
I kind of agree with the previous poster that, if done properly, this would benefit the seller and the consumer.
"Oh, cheeseburgers are a dollar right now at Wendy's, let's go there instead" has an interesting sort of cost-savings allure to it on a road trip.
Added: I think what would make the idea more OK with me is if the prices are fixed, but there are dynamic discounts applied to them. Then people like me will know how much things cost, and sometimes be surprised by a discount. It would change the whole vibe from "I'm being taken for a ride" to "I got a gift".
This really screws anybody with limited income and who isn't "savy" enough to order their burger on an app.
We are used to surge pricing in some sectors. What if it comes to some other, traditional sectors. Should there be surge pricing in, IDK, healthcare?
It certainly feels dystopic, but it is worth discussing in detail. I am not sure if I can think of all the consequences myself.
I agree that the original post is neither well thought out nor particularly well written, though.
In the immediate aftermath of the 2002 floods in Prague, a lot of police and even soldiers were deployed to the flooded areas to prevent looting.
I think this was a sort-of surge law enforcement. The problem was anticipated and prevented, though at some extra cost.
I don't think modern societies would tolerate that, but it is interesting to contemplate the idea that something like "surge pricing" was used in times when people didn't know what "zero" or "America" was.
If you cannot keep up with compute during regular hours, then perhaps you would find some benefit in seeing some of the load distributed to weekend hours.
There are no "shoulds" in life – if you want to offer healthcare services under a surge model, go nuts – but it is unlikely that surge pricing would be beneficial in healthcare. Surge pricing meant to incentivize shifting some activity to another time of day.
Routine healthcare needs are generally already scheduled by appointment to ensure appropriate distribution. As such, there are no surges. Unexpected healthcare needs may encounter surges, but as they are not expected, a higher price doesn't alter incentives. Nobody wants to have unexpected healthcare needs in the first place. They aren't thinking "You know, a hospital visit is cheaper at 11AM. That's when I'll choose to break my arm!" Without that, you don't gain anything with surge pricing.
But someone thinking "You know, lunch is cheaper at 11AM. That's when I'm going to start eating lunch!" is quite realistic and beneficial to the restaurant. And, indeed, surge pricing is nothing new for restaurants for exactly that reason. Of course, traditionally, they have called it "happy hour" rather than "surge pricing", but the idea is the same.
The math for happy hour looks like a similar thing, but it's not, because alcohol. drunk people do dumb things and one of those things is not leave and spend money and be entertaining, among other things.
As long as I have a choice, I will avoid companies that play such games.
It may have been one of those "customers wanted the faster horse" situations where the business tried to build a faster horse.
On one hand, I really dislike being fleeced.
On the other hand, price is a signal and if there is a shortage of taxis/fast food, maybe I should be thinking about alternatives or not using the service at all. Overconsumption is a thing too.
My experience with Uber says that it is a lot better to pay more, but be sure that the car actually comes, than being promised a bargain and then left at the curb in drizzling rain at midnight, because everyone cancels on you.
(My anecdotal opinion would be no - airlines price discriminate like crazy and that's a very low-margin business)
2) What stands out as a larger issue is the "“AI-enabled menu changes and suggestive selling”. Suggestive / upselling means they are going to tune AI to figure out how to sell more of their highest margin products with perfectly tuned AI to separate you from a few more shekels on each order. EG "add a 36oz coca cola to that order for X cents more." where virtually "x = anything" is a win for Wendys. And a disaster for human health.
(1) https://www.ajc.com/news/nation-world/burger-chain-wendys-lo...
(2) https://www.cbsnews.com/news/wendys-surge-pricing-dynamic-pr...
(3) https://www.wendys.com/blog/drive-thru-innovation-wendys-fre...
I'm not sure it would work well for consumers in a monopoly or duopoly. Think: only one bottled water/soda machine available on a really hot day.
This helps reduce waste.
There's an optimum somewhere. It will be found.
I actually think this is fine, especially for fast food. Fast food has so much competition, in general, that surge pricing may drive the price conscious to other competitors, and reduce the waits for people that really want Wendy’s.