Comment by cle | Hacker News Reader

Comment by cle | Hacker News Reader

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I can't imagine that a dynamic pricing algorithm is terribly innovative. They're essentially adjusting price to control demand so that their service remains consistent. I have a hard time believing that's novel. It's the sum of all the parts that gives Uber its value.

This paragraph disappoints me:

>The company itself should take no money during surge periods (it now takes 20 percent of every fare), so all the money goes to the drivers. Or it should cap prices to consumers but pay the higher price to drivers, essentially subsidizing people’s rides in surge periods. Or when prices rise really sharply, Uber should donate its take to charity.

They're providing the solution that gives customers a consistent experience even during surges. Why should they not be allowed to profit from that? Or why should they not be allowed to use those increased prices during surges to provide even lower prices during lower demand periods? It's really disappointing to hear people give such short-sighted opinions.

I think that paragraph is a problem of poor formatting. Observe the context:

> So pundits have proffered a number of suggestions for solving the public relations problem.

> The company itself should take no money during surge periods… Or when prices rise really sharply, Uber should donate its take to charity.

> These are all interesting ideas. But it’d be a mistake for Uber to let public relations trump economics when it comes to dynamic pricing.

That is, the author isn't actually proposing these ideas, but is repeating and disagreeing with ideas that others have proposed. However, the context should be moved to that paragraph for clarity; as written, it's way too easy to misinterpret.

> I can't imagine that a dynamic pricing algorithm is terribly innovative.

I took that as "... relative to the fixed costs charged by the rest of the service car/taxi industry". As the article notes other industries have been doing this for decades but Taxis still have pricing systems that have probably been in use for most of 100 years.

Well, they're legally required to.

The reason that taxi fares don't vary is not that nobody until Uber had ever thought of varying meter rates. It's that, in developed nations at least, the government imposed a regular rate, largely in an attempt to forestall situations where there is real or perceived gouging of customers. The idea is that nobody could possibly be expected to maintain in their heads different meter rates for every taxi company in town, much less if those rates vary at times of days, and that you didn't want to compel people to jump in the car and then bargain with the driver (as is done in much of the developing world) or otherwise investigate the rates.

Uber's solution of advertising a multiple that you must very explicitly agree to before hailing is, don't get me wrong, a very elegant solution to the problem. But it's not as though they came up with the idea of variable rates for rides-for-hire.

Exactly, I wonder if there's really an innovative algorithm behind, or it's just a bunch of code that maximizes revenue with the simplex algorithm. Media are always quick in bringing up algorithms, yet I've never seen a single company release a paper with one of these algorithms, even when they're tangential to their business and not an advantage over competitors.

Surcharging a surcharge for return for calculating it sounds like the worst sort of rent seeking, but YMoralityMV.

Market pricing is not a surcharge.

Centrally determined algorithms are not markets.

then nothing is a market. Why should the NYSE be a market because the central NYSE authority decided to use bid/ask spreads algorithm and not an auctioning algorithm?

>auctioning algorithm?

Sounds like you're saying that something is a market, then.

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