Uber drivers say rideshare surge pricing backfired on New Year’s Eve
sfexaminer.com
sfexaminer.com
This affects the demand side too: people remember stories of people getting burned by huge surge multipliers, and as a result adjust their behavior (being more willing to call a normal cab, driving instead of taking a cab). Here again the actual surge multipliers matter less than the expectations. By providing reasonable estimates, they could set surge multipliers that would ensure a high supply of drivers and demand for them, instead of having the curves moved out of whack by overestimation.
I think it's probably one of the 'things that could work better' but unlikely something the company makes much money from.
It's a dangerous game. With the cost of ride essentially being an unknown, ranging from cheaper than a cab to many times the cost of a cab, I often wouldn't bother either. People prefer consistency in what they pay for an experience, and when it's inconsistent, I lose trust that the value will be consistent (ie. Uber for most people I believe is attractive if the experience is better or equal in cost to a cab, but terrible when the cost is significantly higher than the convenience/better experience.) At least with a cab I am (fairly) certain of the value.
It's all speculative because how they implement surge is opaque.
I actually did check, and they were running at a 3.5x surge price in NYC. I stood on a street corner for 30 seconds and flagged down a yellow cab easily, so you might say their offer was lacking.
EDIT: reading the article again, I think there's something more of interest in here. Drivers are annoyed at their lack of surge earnings, which makes me wonder to what extent they're unhappy with how much they make at regular prices, and how much they depend on surge pricing windows to really make money.
It looked to me like Uber overrode the algorithm and jacked up the prices really high, even though there wasn't such high demand for Ubers.
I regularly take Uber at 9AM and there will often be no cars in the area (wait time of 8 minutes when usually it's <2 minutes) and the surge shows only 2.0x.
I've encountered a number of situations where Uber's surge prices annoyed people not simply by how expensive it was, but because the person standing next to them got 2.5x and if they had waited another 10 minutes they might get 1.25x or 8x. The non-repeatability can be frustrating and feel unfair.
However, just because NYE 2014 naturally surged to 4.5x doesn't mean that NYE 2015 will, because things change. Not the least of which is the (small, but vocal) backlash against Uber that this article is a part of.
But that was in previous years, right? A lot of things have happened in the last 12 months to change this NYE's outcome: more competition, more of their own cars on the street, a year of bad publicity against Uber, and then telling everyone that there will be surge pricing in effect (instead of letting it happen algorithmically)?
How is anyone surprised by the outcome?
Right now I don't think Uber does a good job at, for want of a less fluffy term, "feeling sentiment". They're extremely good at parsing past data and extracting conclusions, but that's about it.
Well actually they don't because they overrode the algorithm instead of letting it do its job.
The culture at Uber is actually "greed".
Well done Uber.
Therefore traditional push notification to get behind the wheel and start driving wouldn't work if the driver already made plans to celebrate New Year's with the family (and perhaps consume alcohol).
The market would operate much more efficiently as a double auction: potential passengers submit their bids and drivers simultaneously submit their ask prices, and Uber continuously chooses some price that clears the market.
But the drivers love it and I doubt it's going away. 10 kuai is less than 2 bucks and they don't make enough money anyways.
Note that tipping is not a part of Chinese culture, you aren't usually expected to tip. This is more like an incentive for them to come pick you up. I was already tipping 10 kuai anyways before I started using the app, it just felt like the right thing to do.
To me it's a little deceiving, because Uber frames it like this grand algorithm determining the pricing, when in reality I feel there's a substantial human element in it.
My theory is that they may have goosed the algorithm based on prior years, or perhaps their algorithm considers historical data for all (or just important) dates. Creating an algorithm that correctly models demand / pricing for all regions is pretty tough, and there are always going to be situations where what seemed reasonable gives you incorrect results.
It will self regulate. If there isn't enough money in it, there will be less drivers. When ridership goes up, it will attract more drivers.
Isn't that the point?
I'm glad to be living in a city with a functional public transit system (NYC) so I no longer have to be forced to be robbed by Uber (SF).
Unless you want to go to LaGuardia airport.
Actually, I think the M60 SBS should be the actual solution to this, but I haven't ridden it yet. I fly out of JFK even if I have to connect somewhere. (That's 18 minutes on LIRR for me.)
This is basically a retelling of the cab industry origin story. The point is that this is an industry where the barriers to entry are so low, and the supply side so abundant (with the collapse of low skill labor economies across the US, ever more so) that the equilibrium state means everyone goes hungry.
And more relevantly for us silver spoon Silicon Valley types, more and more corner cutting to eke out a profit.
It's interesting watching us re-learn the motivations behind some regulations. This is why medallions were created, a far cry from the mustache twirling evil shenanigans that we'd like to paint on regulations.
The medallion system emerged from real problems. It may not be a particularly good solution, but an alternative that does not address the problem at all seems equally misguided.
If you want to have no customers, then yeah, this is how you would do that.
I want to see the actual data and how Uber, or Lyft came out after NYE. Wasn't the algorithm supposed to help stabilize the supply of Uber cars on the road? I doubt it is designed simply to gouge people when demand is high.
It kind of sounds to me like the media pumped up this idea of "OMG look at how screwed these few people were by surge prices!" Then Uber responded to the critics by issuing warnings about high surge prices on NYE. This further solidified this idea that the price would always shoot up on big nights no matter what. So now you have everyone who's ever driven for Uber, plus a bunch of newcomers all going out driving thinking they are all going to be cashing in on $200 fares. Supply goes up, surge goes down.
Or maybe surge doesn't go all the way down. Uber would have no reason to make the primary function of their algorithm to make drivers more money, or stabilize driver income. They are trying to increase market share and make money. Maybe they think the NYE demand is very inflexible and thus they can restrict the surge pricing to stay above a certain level and not have much of an effect on demand. This would, however, probably only exacerbate the initial problem with oversupply, as more drivers would see surge pricing in effect and start earlier, and stay out later.
There isn't even any anecdotal evidence in the article about the passenger side of the experience, they only have stuff from Lyft/Uber drivers.
People act like Uber/Lyft should be nice to the drivers and treat them well, when in reality they are clients, not prized employees. Uber's relationship with the drivers is a business relationship that is very carefully maintained and fine tuned. If you showed me a similar company that treated drivers very well and was still able to keep prices from exploding, I would gladly use that service over the current players, but it just seems to me that they are doing what makes sense given the current marketplace. Isn't it supposed to be a lot easier gig to be an Uber driver than a city cab driver?
Or, just fixed fares and sometimes you can't get a ride. Seems to work for the rest of the transportation system.
Me and my friends stayed in and drank board games and played tequila.
This is supposedly exactly how it works. Fare multipliers are updated every couple of minutes and fluctuate according to number of available drivers on the road (supply) and number of ride requests (demand).
If Surge pricing is working then there should be a large number of empty cars waiting for rides. Those cars are incentivized to show up by getting paid more than they normally would for a ride of the same distance.