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Uber Reverts Back to Surge Pricing in New York After One Day
- fr0sty 14y agoPrevious discussion: http://news.ycombinator.com/item?id=4725789 http://news.ycombinator.com/item?id=4725789
- jbooth 14y agoHere's my question, gas stations are closing here in NJ when running out of gas. Why aren't they jacking up the price to astronomical rates? There are lines for miles to the gas stations that have electricity. Is this a failure of capitalism in the face of human compassion or what?
- codewright 14y agoPrice gouging during an emergency is illegal in NJ and Christie plans on going on the warpath after this is over.
- starnixgod 14y agoA price increase of more than 10% during or 30 days after a declaration of a state of emergency in NJ is prohibited. http://tinyurl.com/a7j2vgo http://tinyurl.com/a7j2vgo
- endtime 14y ago>Christie plans on going on the warpath Can you elaborate? Does he want to remove the anti-"gouging" laws?
- codewright 14y ago>Can you elaborate? Does he want to remove the anti-"gouging" laws? Quite the opposite, he's a somewhat populist moderate Republican. He plans to prosecute people guilty of increasing their prices more than 10% during the crisis to full extent of the law.
- gwright 14y agoThis is perhaps good politics, but it is stupid economics. Restricting price changes during a crisis (or any time really) is a fantastic way to create shortages, delay the arrival of needed or substitute resources, encourage hording, and so on.
- pyre 14y agoDo you really think that raising (e.g.) gas prices by a large margin will somehow redirect resources to getting more gas into those areas? * The gas stations without electricity aren't to get electricity any fast because the price of gas is higher. * Gasoline shipments aren't going to come any faster. * New gas stations aren't going to pop up as entrepreneurs move into the area to capitalize on increased demand for gas. A disaster isn't necessarily a 'market force.' No one is going to get supplies into a disaster zone faster because they are trying to turn a quick buck. Especially since it isn't like they can setup shop and expect the increased prices to persist.
- jlgreco 14y agoRaising prices will reduce the amount of gas people are willing to put into their cars when they finally do pull up to a working pump. If more people only fill up partially, then more people will be able to make due for a time.
- fr0sty 14y ago> The gas stations without electricity aren't to get electricity any fast because the price of gas is higher. If you can sell gas for $10/gal then it becomes worthwhile to get a generator and start pumping gas. If you can't sell gas at a premium you won't bother. You could say the same for anyone with a truck that has a bulk tank. If they could go house to house selling gasoline at a premium you can bet good money people would be trucking in thousands of gallons of fuel for generators. But that's price gouging so everyone goes without...
- pyre 14y agoI assume it means that anyone caught price gouging during this emergency can't count on the law to look the other way. There will probably be a ton of political pressure and publicity ('bad publicity' from the perspective of a business caught gouging) in an effort to make an example of those retailers that attempt to take advantage.
- dfc 14y agoThe war will be for enforcement and fining: http://nj.gov/governor/news/news/552012/approved/20121027c.html http://nj.gov/governor/news/news/552012/approved/20121027c.h...
- fr0sty 14y agoNew Jersey has an "Anti-gouging" law that makes it illegal for retailers to increase prices by more than 10%.
- jbooth 14y agoThanks, my curiosity is sated.
- 001sky 14y agoIs this a failure of capitalism No, not at all. All of the gas is in the hands of people who bought it. The supple constraints are not problems of incentives, they are problems of physics. Roads are down, plant is not working, traffic, security, etc. The reason anti-gouging laws exist is because jacking up prices has no benefit. It just keeps the poor people from having access to resources. 10 gallons of gas to a rich guy is not making the country or the economy better off, than if the gas is given to a poor/normal person, the day after a hurricane/earthquake, etc. The Feds are going to be on the Hook for $6-7B to fix NY and that's going to be paid by everyone in the country. Most people aren't going to benefit from that, except for the local people in NYC. But we do that as a country to make sure all of the right incentives are in place over the long run, not just opportunistically in the short run.
- deleted 14y ago[deleted]
- tptacek 14y agoThe idea that "jacking up prices" has no constructive purpose is strictly incorrect . When you fix prices on gas, and the relative value of gas shoots up, gas gets allocated to the people whose time is least valuable. When you allow gas prices to float in the same situation, gas gets allocated to the people whose time is most valuable. Neither allocation is optimal; it is indeed unfair for all the gas to go to investment bankers. But that doesn't make it efficient or even fair for all the gas to instead go to the people who can get to the station earliest and wait in lines the longest. Equally importantly, when you fix prices instead of allowing them to float, you enable hoarding. People get gas who don't need the gas, because they're risk averse and overestimate the likelihood that they'll use up what they already have. So gas quickly runs out everywhere. If you leave the fixed price in place for long, eventually all the value that would have been captured by the station owners instead gets captured by the grey market (and the deadweight losses involved in transferring gas to that grey market). It's obviously not good social policy to allow gas station owners to charge $100/gallon for gas during a disaster. But it also seems pretty silly for prices to be capped at 10% of the pre-disaster spot price. Gas could easily float up to $10, $15/gallon (ie: the price of gas in Europe), motivate stations to find creative ways to supply that suddenly lucrative market, dampen the consumer urge to fill their tanks to 100%, and not bankrupt anyone (Americans famously overestimate the impact of gas prices on their daily lives).
- ynniv 14y agoStrict capitalism is heartless, and ruins society. If the only way to share is through dollars, the majority of the burden is placed on the poor. We pretend that capitalism is foundational because it is an easy way to control the vast complexity of resource sharing, but it isn't sufficient for a healthy civilization. Strict capitalism is a third world country, with all security and resources devoted to those with personal wealth.
- gwright 14y agoCould you define this 'strict capitalism' that you think 'ruins society'? There is a lot of evidence that other economic systems do ruin societies (communism, socialism, command economies, crony capitalism, etc) but generally capitalism is credited with being the most successful system for producing wealth and lifting people out of poverty.
- ynniv 14y agoThe emphasis is on "strict", not on "capitalism".
- gwright 14y agoYes, that is why I asked you define what you meant by 'strict'. What characteristic are you trying to identify with that term?
- deleted 14y ago[deleted]
- ynniv 14y agoThe parent wondered why the price of gasoline was not currently astronomically high to reduce demand to meet supply. My response is that this means of sharing a limited resource disproportionally burdens those less wealthy. Over the long term it is reasonable to say that a resource has a high price. In the short term, strict capitalism would say that a wealthy businessman makes better use of that tank of gasoline than someone who is desperately hoping to transport their family out of a flooded house to stay with relatives in another city. That social burden created by the loss the family man endures doesn't carry a dollar amount, so a system based strictly on capitalism can't recognize that it has become poorer than if the resource had been shared in some other fashion.
- alexchamberlain 14y agoI think they've done the right thing; you need a way to balance supply and demand. This is just one way. You can still hail a cab the old way, right?
- adamsmith 14y agoIn a disaster situation if there is no elasticity between price and supply then price gouging laws (social or legal) make a lot of sense. For example, if there's a fixed amount of water around regardless of price people shouldn't be able to raise prices. But in this case there IS elasticity between price and supply, right? Uber is claiming that they'll deliver better service by increasing prices, because supply will increase proportionally. Thus, a functioning economy. AND Uber is waiving 100% of their fees! Price gouging? Really? (Side note: NYC would have more capacity for handing this emergency had they not given an artificial monopoly to cab companies over the last century, vis-a-vis medallions. I realize we can't change the past. Let's just be aware of it so we can learn how to improve.)
- ddlatham 14y agoEven if there is no additional supply available, there still could be some benefit. If the price of gas were far higher, people may not fill up their tank all the way and only purchase what they really need. So instead of the first X people getting full tanks and the next Y people getting nothing from an empty gas station, in some scenarios everyone could get a smaller amount. However, the issue of poor people not having access at higher prices is still a problem. It may be better served by having the government step in to provide each person $Z in gas money (paid for by a tax on "gouging") rather than an outright gouging ban.
- adamsmith 14y agoYou highlight really good points. I guess at scale the government does exactly what you propose (step in and allocate supply per person), for example rationing in World War 2.
- eru 14y agoYes. But don't give people gas money. Just gives them money.
- ddlatham 14y agoAgreed. I say "gas money" above so people envision the poor being able to pay for the gas at high prices, but the whole point of keeping it based on taxes and currency is so that the market can balance between alternatives besides buying gas as well.
- brilee 14y ago... if prices don't go up, what's the incentive for gasoline delivery companies to make the extra effort to bring resources to a disaster-torn city?
- mchanson 14y agoIt seems to me that humans, as a group, act compassionately during crisis. So compassion, or good marketing if you are a cold blooded corp. type, is a good reason to truck more in. FEMA can also, I'm sure, force a commercial concern to do it. They have lots of that scary tinfoil hat power. Many comments in here seem to look at this problem so coldly and rationally. Anti-gouging has a deep moral component. If some of us are not trying to get one over on others of us then you can maintain a stronger community during a crisis. If Bob's gas starts charging $15 for a gallon of gas in a crisis it will cause friction in the community between those who can afford vs. those you cannot and with the employees and owner of the gauging station. We have also, well enough of us that laws were passed, decided as a society that its just immoral/unacceptable behavior. Capitalism is great. It doesn't need to deal with this corner condition well to be a successful system.
- prentis 14y agoDisasters are not a corner condition. Limited resources and unlimited wants is a permanent condition. Disasters just tweak the relative values of these parameters, which are reflected in prices. As always, the system adapts and re-routes the resources to where they're needed most.
- ynniv 14y agoAmazing how people switch their principals regarding free markets when it suits them. Especially rich people. When consumer protection laws are drawn up, they will be the "end of America". When financial institutions have bankrupted themselves, they "need to be protected". It's "progress" to prevent people from bringing food onto private property so that you can massively overcharge them for unhealthy foods. It's "gouging" to allow others to charge more when demand far exceeds supply in an emergency. I agree that leaning solely on price in all circumstances is a poor way to balance supply and demand. And I don't want anyone to forget how this works when social sacrifices are demanded for "American success" in the future.
- eru 14y agoIt is interesting how your first two paragraphs don't connect with your third. Shouldn't the right reaction against the hypocracy be to have firm and simple principles, like relying on price as a signal?
- koenigdavidmj 14y agoSeems like the main alternative to increasing prices is `it's not sustainable for us to run at all until this is cleaned up'. Is that a suitable alternative?
- JumpCrisscross 14y agoA.k.a. a shortage
- ynniv 14y agoIf I were them, I would sink some of that massive VC into paying the difference as marketing. Keep prices stable, but ration rides based on how often people have used uber. ie, attract as many possible new customers.
- jonny_eh 14y agoWe're talking $100 000 a day. That's quite a marketing budget!
- ynniv 14y agoNo, substantive marketing campaigns are orders of magnitude more. And, it depends on how many new customers they get and how long drivers will cost extra. The just raised $50 mil, and the subways will be back in a week, two tops... do the math. It isn't every day you can buy happy new customers and good press, and on the days you can it usually costs more.
- magikbum 14y agoThis is all moot any ways. Town cars are allowed to pick up any passengers during the crisis. Effectively unleashing a whole lot more supply. As well town cars and yellow cabs are now allowed to pick up multiple passengers going to different locations while continuing to run the first passengers meter. I don't agree with this policy at all. You try getting an Uber car on a Saturday night it's not "surge pricing" when something goes up 3x times, it's just disgusting even more so during the current situation.
- aidenn0 14y agoI don't see how the current situation can be called "disgusting" since Uber isn't making any money off of the current situation. (I'm assuming that you mean it's disgusting that they are using an emergency to make lots of money)
- magikbum 14y agoThis is all moot any ways. Town cars are allowed to pick up any passengers during the crisis. Effectively unleashing a whole lot more supply. As well town cars and yellow cabs are now allowed to pick up multiple passengers going to different locations while continuing to run the first passengers meter. I don't agree with this policy at all. You try getting an Uber car on a Saturday night it's not "surge pricing" when something goes up 3x times, it's just disgusting even more so during the current situation.
- MattRogish 14y agoGood! Living in NYC boroughs there are little/no taxis, so we have to rely on car services. Since Sandy they are all consistently booked solid (provided you can even get them on the phone: most are "busy" forever). Yet, with Uber dynamic pricing, I have been able to get a car when needed. Yes, I paid more - but at least I got a car that I wasn't going to get otherwise. Awesome!
- rayiner 14y agoWhile we're on the subject... Isn't it amazing what kind of rapid and effective response you get when the people in trouble are among the richest in the country (NYC/NJ coast) versus the poorest in the country (New Orleans)? I'm not complaining. I'm back in my Manhattan office two days after a truly epic disaster. I rode the train into work this morning, along the coast of Long Island Sound no less. It took ~10 minutes longer than usual, but on the whole the recovery is phenomenally impressive.
- grayc 14y agoWithout getting into politics (too much)... there are a lot of reasons for different responses between this hurricane and Katrina. Parts of New Orleans being below sea level probably matters a lot. Plus, FEMA was pretty clearly mismanaged then and doesn't seem to be now. I think those two factors probably account for more of the variation than the wealth of the inhabitants does, and I'm sure that I'm unaware of other important differences. edit: "sea level" should read "water level"
- eru 14y agoAlso New York is richer partly because it is better managed.