14 ms·

Report says Uber surge pricing has a twist: some drivers flee

49 points by aceperry 11y ago

tim333 11y ago
Looks like they are setting the price too high
- danieltillett 11y ago
  It depends on what the aim is, but if it is to maximise revenue then yes that would be the obvious conclusion. I think the demand is just too small and noisy to accurately price.
  - Symmetry 11y ago
    I thought that Uber didn't get any of the extra surge price? In that case they're just trying to clear up congestion as quickly as possible so the price might be optimal from their prospective.
    - potatolicious 11y ago
      Lyft is (was?) the one that doesn't take a cut of surge pricing ("Prime Time" in their vocabulary). Lyft's cut is (was?) based on the standard fare, and the driver got the entirety of the surge bonus. 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.
jessriedel 11y ago
Link to the actual paper is down, but this one is still working: https://consumermediallc.files.wordpress.com/2015/10/chen-imc15.pdf https://consumermediallc.files.wordpress.com/2015/10/chen-im...
- bibinou 11y ago
  http://www.ccs.neu.edu/home/cbw/pdf/chen-imc15.pdf http://www.ccs.neu.edu/home/cbw/pdf/chen-imc15.pdf
madeofpalk 11y ago
I don't see this as a twist - it appears surge pricing is working exactly as planned. When resources are scarce, it limits demand and ensure that there are drivers available for those who really need it (who will pay).
- chinathrow 11y ago
  The story is about drivers wo drive out of a surge pricing area, not about customers ("who will pay").
- braythwayt 11y ago
  To elaborate on https://news.ycombinator.com/item?id=10477319 https://news.ycombinator.com/item?id=10477319: 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.
  - oldmanjay 11y ago
    I'm curious about what you are communicating with the incentivize/encourage split. I presume from the presentation that you found it meaningful. Given that your entire comment can be summed up as encouraging connotation management, I'm wondering what you see in that word pair.
jackgavigan 11y ago
Am I the only one that's concerned that Uber are trying to patent Supply & Demand? https://www.google.com/patents/US20130246207 https://www.google.com/patents/US20130246207
- rayiner 11y ago
  Claim 1 is breathtakingly broad and is susceptible to an Alice challenge.
  - Silhouette 11y ago
    Having had some experience recently of applying for patents, it's disappointing to see how much trouble we have to go to in order to justify things like originality and inventive steps to the various patent authorities, and then to see that something like this is apparently still working its way through the process several years after its original filing. I appreciate that such systems have to be seen to be fair, and challenging claims has to be done based on some objective standard and proper documentary evidence. Still, if your first claim has pretty much an entire field with many years of history serving as prior art, you'd think at some point someone would just say "no".
- mfringel 11y ago
  It's not 'supply and demand'; it's centrally-planned dynamic pricing that just happens to be done by a private entity.
  - austenallred 11y ago
    The patent is also very specific about how this is done. Sure, some of the terms are broad: That's just how patents work nowadays. 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.
  - thwarted 11y ago
    The examiner did cite Adam Smith "Wealth of Nations". It needs a citation for centralized planning too.
oneJob 11y ago
Surge pricing is avoided by customers. Solution, never change price on consumer side but have sliding payment to drivers. Increase flat consumer charge / mile by $0.25 and then use algorithms to determine where / when heavy usage is expected and increase pay to drivers during and briefly before. Patent pending, of course.
- deleted 11y ago
  [deleted]
- RobinL 11y ago
  This is interesting, but as an economist it immediately struck me that something in this argument feels wrong. 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?
  - JoeAltmaier 11y ago
    Oh! I know! Regulate so that only Uber can operate in a given market, maybe issuing coins or tokens or medallions, anyway something so you know the driver is legit and safe to use. Thus keeping the whole industry safe and reasonably profitable for all those involved.
    - planfaster 11y ago
      Is this sarcasm? I know you know that this would turn Uber into regular taxi cabs.
    - austenallred 11y ago
      And then let the people who have owned the medallions gouge those who don't by charging them $40,000/year to rent a car they don't even get to keep. 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.
ascorbic 11y ago
Nobody goes to that bar anymore. It's too crowded.
dec0dedab0de 11y ago
I think Uber is being smart here. Instead of being suckered into waiting too long for a ride, the user knows it is their decision. I wish restaurants would do this.
- dcarmo 11y ago
  If that's the case, it's actually pretty smart. Do you think it could work in other fields (such as restaurants, as you mentioned)? I mean, would people be ok with paying more in a restaurant that's crowded?
  - redblacktree 11y ago
    Restaurants already do this, but they do it in reverse. Instead of higher prices during peak hours, they offer discounts during off-peak hours.
  - dec0dedab0de 11y ago
    As someone who never thinks ahead to make reservations, there are definitely times I would pay more to eat now. Though most of the time I would really rather know that they are busy, and just go somewhere else, instead of sitting there waiting for an estimate that could be way off.
- jrpt 11y ago
  Restaurants do this with things like happy hours or early bird specials. The point is to help shift demand to off-peak hours.
- frandroid 11y ago
  Just like the customers and drivers mentioned in the story, if a restaurant decided to unpredictably charge double for their food due to being busy, I would go eat elsewhere and never come back. (Many restaurants do this predictably by charging less for lunch than for dinner, and attract different crowds)
peterwwillis 11y ago
> “Without surge pricing, Uber is not really Uber — you can’t push a button and get a ride in minutes,” an Uber economist and an Uber data scientist wrote in a blog post last month about a different report on surge. > 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?
- wcummings 11y ago
  >this exposes a pretty glaring hole in Uber's model: the inability to hail a car by hand This is precisely the privilege a medallion gets you.
- jessriedel 11y ago
  For 95% of the US population (i.e., outside the top 10 or so city centers), hailing cab by hand isn't feasible because the density isn't high enough. So you have to pick up a phone and call anyways. 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.
- marcosdumay 11y ago
  Hum, you get somebody to help you with their phone, and call some Uber competitor. I'm sure civilization won't fall because of such a flaw. 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?
- PantaloonFlames 11y ago
toast0 11y ago
Of course drivers in a surge area flee, they probably have a passenger in their car who wanted to go somewhere.
- nathancahill 11y ago
  Drivers disapper from the map when they pick up a passenger, so if the researchers were able to see cars fleeing a surge area, the cars were empty.
AshFurrow 11y ago
“We’re data-driven as long as the data reinforces our pre-held ideas.”
kordless 11y ago
> Uber responded that the researchers couldn’t really see what was going on with drivers. 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.
arprocter 11y ago
If we take Uber on their word that drivers do move towards the surge areas, wouldn't that just create surges in the areas they were previously in?

49 points by aceperry 11y ago

tim333 11y ago

Looks like they are setting the price too high

danieltillett 11y ago
It depends on what the aim is, but if it is to maximise revenue then yes that would be the obvious conclusion. I think the demand is just too small and noisy to accurately price.
- Symmetry 11y ago
  I thought that Uber didn't get any of the extra surge price? In that case they're just trying to clear up congestion as quickly as possible so the price might be optimal from their prospective.
  - potatolicious 11y ago
    Lyft is (was?) the one that doesn't take a cut of surge pricing ("Prime Time" in their vocabulary). Lyft's cut is (was?) based on the standard fare, and the driver got the entirety of the surge bonus. 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.

jessriedel 11y ago

Link to the actual paper is down, but this one is still working: https://consumermediallc.files.wordpress.com/2015/10/chen-imc15.pdf https://consumermediallc.files.wordpress.com/2015/10/chen-im...

bibinou 11y ago
http://www.ccs.neu.edu/home/cbw/pdf/chen-imc15.pdf http://www.ccs.neu.edu/home/cbw/pdf/chen-imc15.pdf

madeofpalk 11y ago

I don't see this as a twist - it appears surge pricing is working exactly as planned. When resources are scarce, it limits demand and ensure that there are drivers available for those who really need it (who will pay).

chinathrow 11y ago
The story is about drivers wo drive out of a surge pricing area, not about customers ("who will pay").
braythwayt 11y ago
To elaborate on https://news.ycombinator.com/item?id=10477319 https://news.ycombinator.com/item?id=10477319: 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.
- oldmanjay 11y ago
  I'm curious about what you are communicating with the incentivize/encourage split. I presume from the presentation that you found it meaningful. Given that your entire comment can be summed up as encouraging connotation management, I'm wondering what you see in that word pair.

jackgavigan 11y ago

Am I the only one that's concerned that Uber are trying to patent Supply & Demand? https://www.google.com/patents/US20130246207 https://www.google.com/patents/US20130246207

rayiner 11y ago
Claim 1 is breathtakingly broad and is susceptible to an Alice challenge.
- Silhouette 11y ago
  Having had some experience recently of applying for patents, it's disappointing to see how much trouble we have to go to in order to justify things like originality and inventive steps to the various patent authorities, and then to see that something like this is apparently still working its way through the process several years after its original filing. I appreciate that such systems have to be seen to be fair, and challenging claims has to be done based on some objective standard and proper documentary evidence. Still, if your first claim has pretty much an entire field with many years of history serving as prior art, you'd think at some point someone would just say "no".
mfringel 11y ago
It's not 'supply and demand'; it's centrally-planned dynamic pricing that just happens to be done by a private entity.
- austenallred 11y ago
  The patent is also very specific about how this is done. Sure, some of the terms are broad: That's just how patents work nowadays. 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.
- thwarted 11y ago
  The examiner did cite Adam Smith "Wealth of Nations". It needs a citation for centralized planning too.

oneJob 11y ago

Surge pricing is avoided by customers. Solution, never change price on consumer side but have sliding payment to drivers. Increase flat consumer charge / mile by $0.25 and then use algorithms to determine where / when heavy usage is expected and increase pay to drivers during and briefly before. Patent pending, of course.

deleted 11y ago
[deleted]
RobinL 11y ago
This is interesting, but as an economist it immediately struck me that something in this argument feels wrong. 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?
- JoeAltmaier 11y ago
  Oh! I know! Regulate so that only Uber can operate in a given market, maybe issuing coins or tokens or medallions, anyway something so you know the driver is legit and safe to use. Thus keeping the whole industry safe and reasonably profitable for all those involved.
  - planfaster 11y ago
    Is this sarcasm? I know you know that this would turn Uber into regular taxi cabs.
  - austenallred 11y ago
    And then let the people who have owned the medallions gouge those who don't by charging them $40,000/year to rent a car they don't even get to keep. 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.

ascorbic 11y ago

Nobody goes to that bar anymore. It's too crowded.

dec0dedab0de 11y ago

I think Uber is being smart here. Instead of being suckered into waiting too long for a ride, the user knows it is their decision. I wish restaurants would do this.

dcarmo 11y ago
If that's the case, it's actually pretty smart. Do you think it could work in other fields (such as restaurants, as you mentioned)? I mean, would people be ok with paying more in a restaurant that's crowded?
- redblacktree 11y ago
  Restaurants already do this, but they do it in reverse. Instead of higher prices during peak hours, they offer discounts during off-peak hours.
- dec0dedab0de 11y ago
  As someone who never thinks ahead to make reservations, there are definitely times I would pay more to eat now. Though most of the time I would really rather know that they are busy, and just go somewhere else, instead of sitting there waiting for an estimate that could be way off.
jrpt 11y ago
Restaurants do this with things like happy hours or early bird specials. The point is to help shift demand to off-peak hours.
frandroid 11y ago
Just like the customers and drivers mentioned in the story, if a restaurant decided to unpredictably charge double for their food due to being busy, I would go eat elsewhere and never come back. (Many restaurants do this predictably by charging less for lunch than for dinner, and attract different crowds)

peterwwillis 11y ago

> “Without surge pricing, Uber is not really Uber — you can’t push a button and get a ride in minutes,” an Uber economist and an Uber data scientist wrote in a blog post last month about a different report on surge. > 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?

wcummings 11y ago
>this exposes a pretty glaring hole in Uber's model: the inability to hail a car by hand This is precisely the privilege a medallion gets you.
jessriedel 11y ago
For 95% of the US population (i.e., outside the top 10 or so city centers), hailing cab by hand isn't feasible because the density isn't high enough. So you have to pick up a phone and call anyways. 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.
marcosdumay 11y ago
Hum, you get somebody to help you with their phone, and call some Uber competitor. I'm sure civilization won't fall because of such a flaw. 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?
PantaloonFlames 11y ago

toast0 11y ago

Of course drivers in a surge area flee, they probably have a passenger in their car who wanted to go somewhere.

nathancahill 11y ago
Drivers disapper from the map when they pick up a passenger, so if the researchers were able to see cars fleeing a surge area, the cars were empty.

AshFurrow 11y ago

“We’re data-driven as long as the data reinforces our pre-held ideas.”

kordless 11y ago

> Uber responded that the researchers couldn’t really see what was going on with drivers. 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.

arprocter 11y ago

If we take Uber on their word that drivers do move towards the surge areas, wouldn't that just create surges in the areas they were previously in?