4 ms·

I have heard a lot of people speak about dynamic pricing, but I have yet to hear any benefit to the consumer or society as a whole. Basically any possible pitc

I have heard a lot of people speak about dynamic pricing, but I have yet to hear any benefit to the consumer or society as a whole. Basically any possible pitch for it is worse in every way than simple downward wealth redistribution.

paxys 1y ago
Going by pure economic theory "dynamic pricing" actually benefits both buyers and sellers in a marketplace. There are plenty of cases where it makes sense – lunch menus at restaurants, grocery store coupons, retail bargain bins, dollar menus, happy hour deals, senior/youth/student discounts, even surge pricing in Uber & Lyft. Of course like with every aspect of economics how something is implemented matters a lot more than how it sounds on paper. Especially in the case of rideshare/food delivery, where the middleman has all the data and makes all the decisions.
- NoTeslaThrow 1y ago
  Well that's certainly AN economic theory, but it feels a little polyannish/unreasonably hopeful. Like most of american macroeconomic discourse.
  - kevin_thibedeau 1y ago
    [flagged]
  - mcmcmc 1y ago
    Where exactly does macro come into play here?
- jowea 1y ago
  Wouldn't perfect individualised dynamic pricing mean that the seller (Uber in this case) would get to capture the entire consumer surplus? Is that good?
  - pbh101 1y ago
    Yes but also that some people would be getting a service that they otherwise wouldn’t be able to afford. But there’s little/no incentive for a pure seller to do that, although for a marketplace like Uber there is more possibility for that, in order to maintain liquidity on the other side of the transaction. I listened to an interview where Uber CEO Dara K note there is always an incentive pool, and based on the market it is either riders or drivers who are getting the incentive money at any given time.
  - nothrabannosir 1y ago
    Ideally the remedy is competition.
- AlchemistCamp 1y ago
  Yes. This is why getting an Uber is merely expensive instead of impossible on rainy days or on New Year's Eve. Dynamic pricing makes it possible for both riders and drivers to respond to changes in supply and demand. If prices were static, many drivers would prefer to go to a New Year's Eve celebration themselves than work, but when it becomes their biggest paying shift of the year, they're a lot more willing to do it. Riders have to pay a bigger price if they want a ride at peak times, but it's still possible to get one when they really have a strong preference to.
nradov 1y ago
Prices are always dynamic in every business. The only difference is in how frequently the price changes. If you take your idea to the logical extreme then you're essentially arguing for permanently fixed prices. This is one reason why it's sometimes impossible to get a taxi in places where the rates are fixed by government edict.
- NoTeslaThrow 1y ago
  I don't think we're referring to the same concept. Dynamic pricing implies charging two different concurrent customers different prices for the same good or service. The only place you can see this now are basically reward/promo/point programs, which while also gross (basically, making transactiobs cheaper for the rich) at least seem to have some proponents.
  - paxys 1y ago
    You are thinking of price discrimination, which is a subcategory of dynamic pricing. Changing prices based on time of day, current demand, tiers/SKUs or really anything else is also collectively dynamic pricing.
    - NoTeslaThrow 1y ago
      I would probably call this "charge discrimination", which gives a clear indication which side of the party is empowered with this concept. Still, wildly volatile pricing is also an excellent reason to avoid taxi apps. Why politicians have no desire to rein them in is baffling. I guess the stock market is really all that matters at the end of the day....
    - lurk2 1y ago
      Price discrimination isn’t a subcategory of dynamic pricing. Dynamic pricing is equivalent to what is colloquially referred to as surge pricing, whereas price discrimination is based on the buyer’s perceived willingness and ability to pay. Dynamic pricing could technically fall into the category of price discrimination if the discrimination is temporal (e.g. people who need a taxi at 8:00 AM pay more than people who need a taxi at 8:00 PM), but generally price discrimination refers to changes in price based upon anticipated demand, whereas dynamic pricing refers to changes in price based on actual demand.
rtkwe 1y ago
In theory surge pricing should bring more drivers into the area making the service better for riders. Not sure how much that actually works out in practice though without data only Uber really has.
lurk2 1y ago
Surge pricing in theory incentivizes more drivers to operate during peak times, reducing wait times for passengers. If you’ve used these kinds of apps in regions where they aren’t popular, it can be quite common to not have anyone pick up your fare. If you could bid up the price, you would be more likely to incentivize any idle drivers to pick up your fare. A driver might not be willing to get out of bed for a $10 fare, but the same driver might be willing to get out of bed for a $30 fare.

paxys 1y ago

Going by pure economic theory "dynamic pricing" actually benefits both buyers and sellers in a marketplace. There are plenty of cases where it makes sense – lunch menus at restaurants, grocery store coupons, retail bargain bins, dollar menus, happy hour deals, senior/youth/student discounts, even surge pricing in Uber & Lyft. Of course like with every aspect of economics how something is implemented matters a lot more than how it sounds on paper. Especially in the case of rideshare/food delivery, where the middleman has all the data and makes all the decisions.

NoTeslaThrow 1y ago
Well that's certainly AN economic theory, but it feels a little polyannish/unreasonably hopeful. Like most of american macroeconomic discourse.
- kevin_thibedeau 1y ago
  [flagged]
- mcmcmc 1y ago
  Where exactly does macro come into play here?
jowea 1y ago
Wouldn't perfect individualised dynamic pricing mean that the seller (Uber in this case) would get to capture the entire consumer surplus? Is that good?
- pbh101 1y ago
  Yes but also that some people would be getting a service that they otherwise wouldn’t be able to afford. But there’s little/no incentive for a pure seller to do that, although for a marketplace like Uber there is more possibility for that, in order to maintain liquidity on the other side of the transaction. I listened to an interview where Uber CEO Dara K note there is always an incentive pool, and based on the market it is either riders or drivers who are getting the incentive money at any given time.
- nothrabannosir 1y ago
  Ideally the remedy is competition.
AlchemistCamp 1y ago
Yes. This is why getting an Uber is merely expensive instead of impossible on rainy days or on New Year's Eve. Dynamic pricing makes it possible for both riders and drivers to respond to changes in supply and demand. If prices were static, many drivers would prefer to go to a New Year's Eve celebration themselves than work, but when it becomes their biggest paying shift of the year, they're a lot more willing to do it. Riders have to pay a bigger price if they want a ride at peak times, but it's still possible to get one when they really have a strong preference to.

nradov 1y ago

Prices are always dynamic in every business. The only difference is in how frequently the price changes. If you take your idea to the logical extreme then you're essentially arguing for permanently fixed prices. This is one reason why it's sometimes impossible to get a taxi in places where the rates are fixed by government edict.

NoTeslaThrow 1y ago
I don't think we're referring to the same concept. Dynamic pricing implies charging two different concurrent customers different prices for the same good or service. The only place you can see this now are basically reward/promo/point programs, which while also gross (basically, making transactiobs cheaper for the rich) at least seem to have some proponents.
- paxys 1y ago
  You are thinking of price discrimination, which is a subcategory of dynamic pricing. Changing prices based on time of day, current demand, tiers/SKUs or really anything else is also collectively dynamic pricing.
  - NoTeslaThrow 1y ago
    I would probably call this "charge discrimination", which gives a clear indication which side of the party is empowered with this concept. Still, wildly volatile pricing is also an excellent reason to avoid taxi apps. Why politicians have no desire to rein them in is baffling. I guess the stock market is really all that matters at the end of the day....
  - lurk2 1y ago
    Price discrimination isn’t a subcategory of dynamic pricing. Dynamic pricing is equivalent to what is colloquially referred to as surge pricing, whereas price discrimination is based on the buyer’s perceived willingness and ability to pay. Dynamic pricing could technically fall into the category of price discrimination if the discrimination is temporal (e.g. people who need a taxi at 8:00 AM pay more than people who need a taxi at 8:00 PM), but generally price discrimination refers to changes in price based upon anticipated demand, whereas dynamic pricing refers to changes in price based on actual demand.

rtkwe 1y ago

In theory surge pricing should bring more drivers into the area making the service better for riders. Not sure how much that actually works out in practice though without data only Uber really has.

lurk2 1y ago

Surge pricing in theory incentivizes more drivers to operate during peak times, reducing wait times for passengers. If you’ve used these kinds of apps in regions where they aren’t popular, it can be quite common to not have anyone pick up your fare. If you could bid up the price, you would be more likely to incentivize any idle drivers to pick up your fare. A driver might not be willing to get out of bed for a $10 fare, but the same driver might be willing to get out of bed for a $30 fare.