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Surge pricing is avoided by customers. Solution, never change price on consumer side but have sliding payment to drivers. Increase flat consumer charge / mile b

by 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.
    - JoeAltmaier 11y ago
      Half of that describes Uber precisely. So its not a panacea.
      - austenallred 11y ago
        Which half?
- oneJob 11y ago
  Not necessarily. Goods & services can be differentiated by qualitative as well as quantitative measures. For example, and just a personal anecdote, I like Lyft more than Uber, as a company, but generally use Uber because it generally has quicker pickup times. I don't have a clue as to what the price differential might be. "Reliability" is an especially important component in this type of market, because you're trying to get somewhere for some reason and willing to pay, so there is less price elasticity overall for this product. A small increase in price for 95% of the time (averaged out over geographical-time units) would not likely be sufficient to outweigh the gain in reliability and convenience. There are other explanations / scenarios of course. I have a degree in economics, and, well, respectfully this seems more like a business/marketing domain issue. The change I was proposing would be at the same time too small of a price change and too muddled with other (real world, real time) variables to be well-modeled in the realm of economics.
  - eru 11y ago
    > "Reliability" is an especially important component in this type of market, because you're trying to get somewhere for some reason and willing to pay, so there is less price elasticity overall for this product. Not sure about the low price elasticity. The article argues that demand for uber-rides varies drastically with price.
austenallred 11y ago
Why is that any better? If I want to go home on New Year's Eve and I can take annoying public transport or a quick Uber at the same time as everybody else, it makes sense that I should have to pay more. Economics dictates as demand goes up and supply remains the same the price should go up. Once either supply goes up or demand goes down the price goes down. Uber is literally modeling economic theory.
Shivetya 11y ago
It is avoided by some customers but not all and that is the point. Sure the frugal among us will not look for a ride when surge pricing is in place but someone still is.
SilasX 11y ago
The problems with that approach are: 1) You're limited to a surge rate of ~1.25x, no more. (Maybe a few more percent if you pass through the safe rides fee.) Edit: and, per sibling, you're giving away business if you increase general rates. 2) You're giving up the extra profits you'd make at the very times when your product is most profitable and valuable, crippling the business model. It would be like if Facebook waived the price differential between general vs targeted ads.

by oneJob 11y ago

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.
  - JoeAltmaier 11y ago
    Half of that describes Uber precisely. So its not a panacea.
    - austenallred 11y ago
      Which half?
oneJob 11y ago
Not necessarily. Goods & services can be differentiated by qualitative as well as quantitative measures. For example, and just a personal anecdote, I like Lyft more than Uber, as a company, but generally use Uber because it generally has quicker pickup times. I don't have a clue as to what the price differential might be. "Reliability" is an especially important component in this type of market, because you're trying to get somewhere for some reason and willing to pay, so there is less price elasticity overall for this product. A small increase in price for 95% of the time (averaged out over geographical-time units) would not likely be sufficient to outweigh the gain in reliability and convenience. There are other explanations / scenarios of course. I have a degree in economics, and, well, respectfully this seems more like a business/marketing domain issue. The change I was proposing would be at the same time too small of a price change and too muddled with other (real world, real time) variables to be well-modeled in the realm of economics.
- eru 11y ago
  > "Reliability" is an especially important component in this type of market, because you're trying to get somewhere for some reason and willing to pay, so there is less price elasticity overall for this product. Not sure about the low price elasticity. The article argues that demand for uber-rides varies drastically with price.

austenallred 11y ago

Why is that any better? If I want to go home on New Year's Eve and I can take annoying public transport or a quick Uber at the same time as everybody else, it makes sense that I should have to pay more. Economics dictates as demand goes up and supply remains the same the price should go up. Once either supply goes up or demand goes down the price goes down. Uber is literally modeling economic theory.

Shivetya 11y ago

It is avoided by some customers but not all and that is the point. Sure the frugal among us will not look for a ride when surge pricing is in place but someone still is.

SilasX 11y ago

The problems with that approach are: 1) You're limited to a surge rate of ~1.25x, no more. (Maybe a few more percent if you pass through the safe rides fee.) Edit: and, per sibling, you're giving away business if you increase general rates. 2) You're giving up the extra profits you'd make at the very times when your product is most profitable and valuable, crippling the business model. It would be like if Facebook waived the price differential between general vs targeted ads.