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The general public's problem with dynamic pricing for highly scarce goods and captive market (stuck in the city) is that it makes for extremely bad feelings. T
by teyc 15y ago
The general public's problem with dynamic pricing for highly scarce goods and captive market (stuck in the city) is that it makes for extremely bad feelings.
The phrase "Price gouging" comes to mind. Even when dynamic pricing is available, as long as people are stuck, they will feel resentment.
Another example is when there are hurricanes or floods. Shops could charge "market pricing" for bottled water, but this only generates ill-will. What shops do is to ration the supplies so that all those who need bottled water get some.
The problem with cabs is you can't implement rationing. Furthermore, supply is always going to be tight even if all the limousines came out in full force. It is one of those once-a-year spike in demand.
The airline industry solves this problem by offering advance bookings. The benefits of advance booking is that it incorporates some kind of price signal so that people can decide whether they wish to travel or not. However, it will take considerable cultural change for people to modify their discretionary going-out based on fares alone.
- shasta 15y agoSteeply increasing the cost of water bottles or scarce items during a flood or hurricane lessens stockpiling more effectively than rationing. Furthermore, prohibiting "gouging" eliminates the incentive for shops to keep an oversupply of water in case of a hurricane.
- teyc 15y agoI couldn't find the article any more, but it was talking about shopkeepers' reluctance to hike the price of bottled water in times of emergency because it harms their long term relationship with a customer. There's nothing wrong with what you talk about in a perfect economic setting. I think humans reason beyond short term economics alone, and an act of graciousness during time of need will be reciprocated in the long run.
- fleitz 15y agoAlso, increased price after a natural disaster causes the supply side to overcome obstacles such as downed trees, and dangerous hazards such as structurally unsound bridges.
- kijin 15y agoI'm not sure if it's a good idea to motivate bottled-water companies to send their trucks over structurally unsound bridges just because people will pay $10 per bottle on the other side of the bridge.
- nostromo 15y agoYou might think differently if you didn't have access to clean drinking water.
- teyc 15y agoDelivering water under extremely hazardous condition is an act of heroism. One doing it should not cheapen it by trying to extract maximum rent, especially from people who might have just lost everything.
- Lazare 15y agoActually, it's an incredibly good idea to motivate bottled-water companies to find ways around structurally unsound bridges to deliver needed water to desperate people on the far side. And we have plenty of health and safety regs that prohibit, for example, ordering an employee to drive on an unsafe bridge, so that concern is rather a red herring.
- teyc 15y agoNo, this is incorrect. People taking risks shipping water over structurally unsound bridges not only put their lives in danger, but also puts rescuers life in danger when they run into difficulties. Recently in Australia, a cave canyoner was rescued but the rescuer died. Reputationally, someone who gives away water during emergency, especially at tremendous cost to themselves get far better returns in the long run after the emergency. Similarly, people who take advantage of others during bad times are often punished or sanctioned later. You have to understand that humans think very differently to Ferengi-style pure economics. Reputation matters. Back to the topic matter - Uber should consider hiring anthropologists in addition to their nuclear scientists when thinking about dynamic pricing.
- teyc 15y agoHardly. A rich person could buy more water than he needs. Then what?