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Comment by rayiner | Hacker News Reader

It's absolutely no surprise that the majority of people might prefer a particular resource to be allocated by lottery instead of auction, because they can't afford to outbid the wealthy minority for those resources. There is a lot of social conditioning in our society to accept auctioning as normal for resources like land and housing, but for things like taxis or tickets auctioning hasn't been practical to date so the socialization isn't there and this more basic preference, arguably rational for the average person, shows through.

You see similar attitudes in many other areas. E.g. when it comes to spectrum auctions, people complain that the big telecom firms just get even richer by buying up all the spectrum. Well sure, that's what happens in markets. Those with the most money buy all the resources.

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That would be rational if the supply was fixed; but since it isn't (the number of drivers increase with the surge pricing), it's far from clear whether the average person is negatively affected by the temporary price increase (as far as I know, surge prices usually last a very short time).

   (the number of drivers increase with the surge pricing)

I doubt there would be suddenly tens of thousands of additional drivers more after the WC final on Sundary in Germany to drive all the people home from the bars and public viewing locations, when more than 80% of the population is watching the game.

    (as far as I know, surge prices usually last a very short time)

Well, that's already sucks enought, when it's late in the night and you want to get home. Might as well wait until I can get public transport in the morning...

Having talked with many Lyft drivers about it, the drivers are definitely aware of what times pay better rates and many of them choose to schedule their workdays around it. I don't know if it works for one off events like the WC but it definitely increases supply during evenings and late nights.

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He never said there would magically be enough drivers to cover all the demand all the time. But there will be comparatively more drivers at times when their profits are higher.

Might as well wait until I can get public transport in the morning...

Ok then, that's fine. Nobody is claiming Uber to be a magic bullet that solves all transportation problems. It's amazing, the sort of expectations people develop. It's a service that is offered, it's an additional option, if it doesn't meet your needs then just continue doing what you did before Uber existed...

This whole "price gouging" thing - people who don't like it can simply choose to not use Uber and move on with their day as usual. All of this outrage reeks of entitlement.

How does surge pricing work from the perspective of the driver? Do you see current rates in different zones? Do you get an alert?

I know they get information about the surges (and I think alerts as well), but I'm not sure about the specifics.

It has nothing to do with that. Surge pricing negatively affects the reliability of the service. As other people have mentioned, when surge pricing is going into effect, it's a signal to drivers that demand is high and supply is low. So they can cancel rides with few repercussions and just take a fare that pays more. It doesn't matter that you're willing to pay more; you have to book another Uber and hope that the price doesn't continue to rise.

Uber's response would be "so then give the driver a bad rating". Right. That works when the driver is the one who the Uber account belongs to, but if you've ever used Uber in NYC you'll know that a driver will often just rent out his cab + phone to another driver. I'd say the Uber driver who actually picks me up is the same one in the profile maybe 30% of the time. These other drivers don't care about their reputation, so damaging their reputation is a poor deterrent to bad behavior. They see an Uber login as the same thing as a cab medallion; an asset to be rented out for profit.

Edit: Also wanted to add that Uber's business model in NYC is that the service is free to taxi drivers, but in exchange the drivers have to pay $4 whenever they cancel a booking. So Uber's business model in NYC needs to encourage drivers to cancel bookings every so often, hence the surge pricing.

>>That works when the driver is the one who the Uber account belongs to, but if you've ever used Uber in NYC you'll know that a driver will often just rent out his cab + phone to another driver. I'd say the Uber driver who actually picks me up is the same one in the profile maybe 30% of the time. These other drivers don't care about their reputation, so damaging their reputation is a poor deterrent to bad behavior. They see an Uber login as the same thing as a cab medallion; an asset to be rented out for profit.

Isn't this a pretty serious violation of Uber's terms of service, which would result in a suspension of the account?

Also, if you send negative feedback to the driver renting the account, eventually the renting driver will lose their Uber account. So they will either stop renting or have their account shut down all together. This could work as a deterrent.

Yeah, but nobody reports them; and even if you did they'd probably just get a new phone with a fake name and sign up again. There are just too many cabbies in NYC and they're too transient to really police it.

> So they can cancel rides with few repercussions

If there's few repercussions, it's only because the people being cancelled on don't file a complaint. And is this actually true? I haven't heard any stories of this happening before.

As far as I'm aware, it's a violation of Uber policies for a driver to cancel without a good reason. My believe was that Uber checks up on every driver cancellation, but perhaps they only do that if the customer complains. Certainly I've complained before when I got cancelled on (unrelated to surge pricing).

> That works when the driver is the one who the Uber account belongs to, but if you've ever used Uber in NYC you'll know that a driver will often just rent out his cab + phone to another driver.

Really? Wow, I've never seen that happen before.. I would expect that to be an extremely serious violation of Uber's terms of services, as jljljl said. Certainly if I ever got picked up by a driver that was not the one listed in the Uber app, I'd file a complaint with Uber, and would consider not even getting in the car.

> Also wanted to add that Uber's business model in NYC is that the service is free to taxi drivers

Are you talking about the Taxi calling functionality in Uber, rather than the actual Uber or UberX service? Because that's quite different. I didn't think surge pricing even affected the regular taxi functionality. Of course, my experience with Uber is in SF, so it's certainly plausible that the model works differently in NYC, though I would be surprised to hear that. Also, $4 when they cancel a booking? That doesn't sound like a good model, are you sure that's how it works? In SF with the taxi functionality my understanding was they simply charged a flat fee for each taxi ride (which is taken out of the guaranteed 20% tip to the driver).

Their business model is different in every city because the laws are different in every city. I only know this because I asked my Uber driver; so I don't know the reasoning behind it in NYC. I would suspect that it's something like dispatch services are not allowed to charge drivers per-ride.

NYC in general has a very different attitude towards cab drivers than SF. The city also has rules that the driver is supposed to put his taxi license in the window, and guess what? Half the time it's either not there or it's someone else's license in the window. It's hard enough to get a taxi many places in NYC that if you refused to ride with these guys, you'd just never get a ride. But basically, the city's enforcement of the rules is lax enough that the drivers ignore any rules placed on them and their customers don't expect them to be followed.

NYC already has plenty of taxis. I would expect Uber to only really be used there either as a) a luxury black car service, or b) a convenient taxi dispatch service. It sounds like you're talking about them as if they're purely the latter. Surely they're acting as both? They could also be c) a cheaper alternative to cabs (as UberX), which is what UberX actually is here in SF, but I don't know if UberX exists everywhere or operates the same way everywhere (laws regarding car services are likely to not be that different everywhere, but UberX exists in a much more grey area that I can very much believe doesn't work everywhere; plus, it doesn't make as much sense when there's already enough taxis to go around).

As a luxury black car service, everything I've already said stands.

Ax a taxi dispatch service, I wouldn't expect really anything I know about Uber to apply. But I wouldn't expect surge pricing to apply either, because when Uber acts as a taxi dispatch service, you're still just paying the regular taxi fare (with the caveat that Uber guarantees a 20% (I think) tip instead of leaving it up to the passenger). And if surge pricing doesn't apply, then neither does the claim that drivers cancel when surge pricing is going up.

As far as I'm aware, the main reason for a taxi to cancel is because of laws requiring that taxis can't say no to a street fare, even if they're being dispatched to pick up someone else. This is the same reason why it can take a while to get a taxi to show up when calling the dispatcher directly, and using Uber to request a pickup shouldn't alter that at all. Of course, I could be misinformed about how that law works, but that's my understanding of it. (And of course the taxi driver could have other personal reasons for canceling, but surge pricing isn't one of them).

On this note, the $4 for canceling fee actually makes some sense, if we assume Uber was unable to successfully recruit enough cab drivers with the model of Uber being paid a flat fee for each ride. Uber still benefits by having taxi dispatch services in its app, because that means it becomes the one-stop app for people who need car-based transportation, and once you have them in the app you might convince them to go with the real Uber services. And the $4 cancellation penalty encourages drivers to not cancel, which in the absence of a rating system (which I don't believe Uber has for taxis, nor could it really enforce due to e.g. taxis being driven by someone other than the owner) is the only real way to incentivize drivers to not cancel.

NYC may have plenty of taxis, but in the outer boroughs it can be hard to find one when you need one.

I don't know it would be fair to call them a "luxury" black car service -- there are plenty of black car services in NYC already, very few of them could be called "luxury". The black car services are basically just pre-negotiated taxis. Uber lets them pick up bookings when they don't have one scheduled.

They actually just enabled UberX this week in NYC -- it's been a disaster. A lot of the taxi and black car drivers are boycotting Uber because UberX undercuts their prices (which are largely regulated by the city, so they can't cut prices in response), and they can still get plenty of fares without Uber. So it's been quite hard to get a car via Uber in NYC this week.

Do these black car services cost more than a taxi? That's pretty much my basic definition of a luxury car service; if you can get equivalent behavior (i.e. transportation from point A to point B) at a cheaper price by using a taxi, then it's a luxury. But if it's not necessarily cheaper to use a taxi, then I would agree it's not necessarily a luxury service.

Uber (the black car option) in SF is significantly more expensive than a taxi (or UberX, which is cheaper than a taxi, even at low surges). My belief was the Uber black car service was roughly equivalent everywhere. Are you saying an Uber black car in NYC is not actually necessarily more expensive?

I am surprised to hear they enabled UberX in NYC. I would expect it to be a disaster, just as you said. Originally UberX was either an appeal to being green (due to hybrids), or simply a cheaper alternative to Uber, but it started out intentionally more expensive than taxis (they even raised the price at one point, citing the fact that it was unintentionally cheaper than taxis for some rides). But they've since changed course, turning UberX into the cheapest service they can. I'm not really sure what their goal is with that, but I can't imagine it makes taxi companies happy. So I assumed they were only doing it in cities where they didn't rely on taxis to fill rides. But as per your earlier comments, it sounds like being a taxi dispatch service is a big part of Uber's NYC offerings, and it's pretty obvious that UberX would interfere with that. And given the large number of cabs already in NYC, it's hard to argue that customers will eschew cabs in favor of UberX, when UberX is the brand new service and cabs are the existing regulated service that already fills their needs.

My best guess here is that Uber's CEO is intentionally trying to replace taxis with the UberX service, because that's the only thing that really explains introducing UberX into a market like NYC. But that seems rather foolish to me. It certainly works in SF where the cabs are so scarce, but I can't imagine it working in NYC, or e.g. London (where AIUI cab drivers have to pass an extremely rigorous knowledge test, a test that UberX drivers would presumably fail quite horribly, so passengers are already used to cab drivers knowing how to get places that UberX wouldn't know).

In NYC, the difference between a black car and a taxi is guaranteed booking (e.g. you can schedule a black car and they'll actually show up). Generally yes, it is more expensive than a taxi, but it's a pre-negotiated rate.

I'm still not sure how UberX works in NYC from a legal perspective (though I'm sure Uber has an army of lawyers who figured out some loophole).

Why don't we use lotteries for airline tickets then?

When supply isn't constrained, auctions benefit everyone. Not just the 'wealthy minority'. If we fixed airline tickets at $400 each and apportioned them lottery style we are ignoring that many business travelers would happily pay $600 for a certainty of getting a ticket and people of limited means would gladly trade time/travel flexibility for a $200 ticket.

Similar forces are at play with taxis. If you line up everyone waiting for a fixed number of taxis at a fixed price, you are ignoring that many people would pay more to skip the line. Paying more will increase the total number of available cars. Shortening the wait time for everyone.

People look at variable pricing as a way for 'rich people to get everything' when it's really about letting some people pay more to subsidize others who pay less.

Uh, its not like surge pricing is optional to get a faster car. If they price increases, there is no subsidizing going on. To take advantage of the theoretically larger supply, I will have to pay the higher price, and when the price decreases, there is no guarantee that the supply will remain high so I may still be unable to get a cab at the lower 'subsidized' price.

You are ignoring marginal cost. If surge pricing covers relatively-fixed expenses of car mainetance etc, it enables slow-business hours to be marginally profitable at a lower price than otherwise.

A lottery instead of an auction makes some amount of sense when talking about a necessary item (like general transportation in an emergency, or milk/other foodstuffs, etc). It doesn't make so much sense when talking about a luxury item.

So the question is, how do you see Uber? I love Uber because it's practically impossible to get a cab in SF, but I don't view Uber as a necessity. It's still basically a luxury car service, no matter how popular it is. If it gets large enough to cause the regular cabs to actually start disappearing, then I'll agree it's moving into the "necessity" space (as it will be supplanting the existing regulated supply of transportation), but until that happens, I don't think it makes sense to demand an auction.

As an analogy, if a natural disaster hits and prevents stores from restocking their milk, AIUI the existing laws prevent them from raising the price on milk in return (as it's generally considered a necessity). But what about the hippy organic store down the block, that sells more expensive cruelty-free, organic, locally-sourced milk? Seems like a bit of a luxury good to me, and I would not have a problem with prices being raised on that particular milk, because I can always go to the grocery store and buy the regular milk like everyone else. Of course, I don't know how the law actually treats this particular scenario (and I am rather curious).

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