6 ms·

Uber upholds capitalism, (possibly) learns downside of price gouging

29 points by ahmadss 13y ago

corin_ 13y ago
> Uber's defense is that it needed to charge so much more to encourage its drivers to stay on the job Maybe people would be more OK with it if Uber kept their commission flat, i.e. they get paid the same for each trip regardless of how much they are charging extra for the conditions. Not saying they have a duty to do this, just that from a PR point of view it would get rid of the assumption that they put prices up too much to increase their profits.
davidedicillo 13y ago
I found myself using other service more often when I see a surcharge. Especially for short rides, I prefer waiting and extra 5 minutes and spend half of the money.
- apendleton 13y ago
  I'm sure Uber would tell you that's exactly how it's supposed to work. The price increase drives some people to seek alternate modes of transport, which keeps the supply stable so it's still possible to get a ride if you're willing to pay the higher fare.
  - aetherson 13y ago
    Wellllll.... Their general line is not "surge pricing reduces demand," but "surge pricing increases supply." Clearly, over here in reality, it does both, but they prefer understandably to emphasize the up-side. The question is, how much does it increase supply? My guess is that it doesn't increase it all that much. Uber does not, to my understanding, have a huge pool of irregular drivers who only occasionally go out onto the road during high surge pricing. They encourage their drivers to work full time, and most surge pricing (ie, not anomalous events like snowstorms) are at times of predictable high demand, when you'd expect most of their drivers to be on the road anyway. My guess is that surge pricing (especially surge pricing in excess of x2) is mainly a windfall for Uber and their drivers, and is less effective about increasing supply than their promotional material would like you to believe. Disclaimer: I work at Flywheel, an Uber competitor. I am not un-biased.
    - holograham 13y ago
      I'd speculate that some of this marketing is designed to lure drivers from other services.
wavefunction 13y ago
$94 11 minute Uber rides... This is why regulation of industry is not always an attempt to hold back the unbridled forces of "progress."
- jowiar 13y ago
  The goal of regulation is to discourage traffic jams, fights, and the like on the side of the street caused by negotiation over price. With Uber you have the opportunity to see the price before pressing the button. Ideally, there are multiple Uber-like systems which will hold prices down, with a Kayak-like service to choose between them.
  - wavefunction 13y ago
    I thought it was to protect the consumer from things like... "price gouging." I agree with your "ideal" situation being ideal, though I guess I expect that service pricing will be "protected business data."
    - jowiar 13y ago
      There's nothing wrong with charging high prices for things that are in high demand and low supply. That's what encourages more suppliers to enter the market. There are two major situations that regulation needs to protect consumers from - asymmetric information and monopolies. Taxis are a major example of the former - that negotiating on the street would create traffic problems, and getting into the cab, then negotiating would create a major imbalance of power in the negotiation. An example of the latter would be if Uber was the only player in the transportation market (market share > some large %) and could charge what they want, and then said something like "the only way to book one of our vehicles is through our app, and you cannot build a system which lets you book either an Uber vehicle or non-Uber vehicle."
- johngalt 13y ago
  If one party is willing to buy and the other willing to sell, where is the issue? If you want regulated rates, wait for a cab. Intentionally using a premium service then demanding price controls makes you sound like the old man complaining that Starbucks coffee should cost a nickel.
jowiar 13y ago
It's a supply and demand thing - there's a choice -- Some people get cabs at sub-market rate, and some stand on the corner for an hour trying to get a cab -- or -- Some people pay more for a cab, while others balk at the price and find an alternative method of transportation. I've stood outside for an hour on a cold, snowy, windy New Year's eve/morn in Boston trying to get a cab... I'll take the price hike vs. the jockeying for sidewalk position, fights over who gets what cab, and other silliness. I think the drivers would too.
- thenmar 13y ago
  There's a choice now, and it's arguable a fair choice. But if Uber puts heavily regulated cab companies out of business, the alternative disappears. That raises some issues in emergency situations like bad weather. Transportation is to some extent a necessity - would you be in favor of stores selling water for $100 a bottle before a hurricane? That might be the price that the market decides but the result of that is people suffering simply because they weren't lucky to be born in the right family.
  - holograham 13y ago
    you are missing the other half -- that high prices drive more market entrants. If the price of bottled Water is 100 dollars then more entrepreneurs will take the risk to transport bottled water to a hurricane prone area because of the profit incentive. This increase in market entrants would in turn drive down the costs to the point where the costs of transporting water to the area equals the ability of people to pay. If a business cannot profitably sell the water in the area then yes, humanitarian aid is probably needed short term (long term there probably needs to be analysis if the area is viable for humans to live in).
    - metaphorm 13y ago
      > that high prices drive more market entrants citation needed. I know this is dogmatic in laissez faire capitalist philosophy, but its really not clear that this occurs in all real markets.
saosebastiao 13y ago
If you aren't willing to pay more during peak times, you have to deal with the scarcity. This is problematic for things like food, water, and shelter during emergencies...not so much for luxury car rides across town.
- gaius 13y ago
  Or holidays during school holidays, another classic example of people not understanding supply-and-demand (and the need to keep the infrastructure running when there is no demand).
- DigitalJack 13y ago
  Scarcity is interesting. It's the root problem that government is trying to manage. With perfect knowledge, a central authority could have goods or services brought to those most in need. This is very alluring to politicians as they naturally make themselves the central authority, and people have a natural bias to believe they are right and will make the right decisions. Eventually you confront the problem of more people being in need than there are resources to satisfy. You can solve this by lottery or some qualification system or money. But someone somewhere will be left in the cold. This may be the poor or some schmuck who's birthday was in February. Sadly most economies don't take the "most in need" concept a a founding principle. It's about trade, where each participant feels they are in a better situation than before the trade. Money is used as an abstraction representing utility/usefulness of an object or work done. This is fine until you discover the person who has no money and apparently does not provide enough utility to get money (or enough money to live). This is where charity can take action. Basically a trade happens where one's position is worse after the trade and the other's is improved. Some believe this charity should be a private affair, some believe it should be compulsory.
tgrass 13y ago
There's a great interview with Mike Munger on Econtalk about the price mechanism during an emergency: http://www.econtalk.org/archives/2012/11/munger_on_john.html http://www.econtalk.org/archives/2012/11/munger_on_john.html
tgrass 13y ago
As I understand it, Uber's prices are listed prior to contracting for a ride. Uber's market is clearly the middle to upper income brackets. If it's understood that the price is time and conditions-variant, I fail to see how their pricing method is unethical.
- smackfu 13y ago
  They might benefit from being a bit more transparent with pricing. From a customer's point of view, the multiplier is just arbitrary ("it's busy, so we're charging seven times what we normally do"), and they have to trust Uber that it is being set fairly. If it gets excessively high, like it has in these recent cases, they start losing that trust in Uber, and move to a competitor.
  - tgrass 13y ago
    I agree, that the firm might benefit from transparency; but the article stresses the need for regulation in the interest of the consumer, not the firm. This is how the price mechanism is supposed to work: it communicates inefficiencies over the long term.
- sneak 13y ago
  It's not unethical at all, it's just that mid-to-upper-class smartphone users in big cities have a wicked sense of entitlement. They approve a dialog that warns them of 7x pricing (not with a button, mind you - but by explicitly thumb-typing the string "7X" into a box!) and then they complain on twitter when their ride is $300 and call Uber crooks. The amount of entitlement found among the smartphone generation is staggering.
jdminhbg 13y ago
In my Uber/Lyft-less city we had a snowstorm last week and I needed to get to the airport. I spent 15 minutes letting my phone fruitlessly ring to various cab companies before giving up and digging my car out to drive and park for probably $90+ for the course of my trip. It's a curious human psychological tic that people think this is a better situation for me than looking at my phone's Uber app and deciding whether $90 for this particular ride would be worth it or not. And not just thinking that the latter is better for me, but that I need to be sheltered by law from encountering the former situation.
- williamcotton 13y ago
  The article is mainly about the shortcomings of pure unregulated capitalism, but thanks for your little story about yourself! Which makes your comment incredibly ironic, you know, because the underlying message is that a system driven only by individual perspectives is fatally flawed.
  - Pinatubo 13y ago
    Beside missing his point completely, your comment is needlessly rude.
    - knowtheory 13y ago
      His point is a pretty meaningless hypothetical comparison. What if uber had been in his city and charged 4000$ for a ride to the airport? Does he live 60 miles from his airport? who the fuck knows? The story isn't even a useful anecdote, it's a Rorschach test for libertarians to project their biases onto.
      - jdminhbg 13y ago
        > What if uber had been in his city and charged 4000$ for a ride to the airport? Then I would have dug car out of the snow and drove to the airport. I would not have been any worse off. The difference is that the LA Times wouldn't write a story about me.
gabemart 13y ago
Are auctions unethical?
- metaphorm 13y ago
  depends on what is being auctioned
  - jtbigwoo 13y ago
    True. Are we talking about auctioning beanie babies or dialysis treatments? I expect that folks would be much more accepting of the former than the latter. (To be clear, I'm not saying that Uber rides fall in the same category as dialysis treatments, just that folks are more sensitive to "unfair" pricing as the product or service gets more essential.)
    - metaphorm 13y ago
      Uber provides transportation. Transportation is much closer to the dialysis side of the spectrum than the beanie baby side.
bengarvey 13y ago
Experiments using the Ultimatum Game have shown that people hate feeling like they're being ripped off, no matter how much we think they should just act rationally and understand the circumstances. A great book on this is Priceless by William Poundstone.
sailfast 13y ago
This article asserts that if taxi cabs were run out of business by Uber then nothing would remain to keep Uber's prices in check. That is completely incorrect. There are a number of competing apps for rides (or they would be built quickly to compete) and cars could freely undercut Uber. I'd be the first to jump in and build an app that pulled each service's ride price to compare options. If price gouging continued, lower priced alternatives would flourish. I'm struggling to see why this demand-driven pricing when provided BEFORE you get in the car and make your purchasing decision is a problem. Without price gouging, would you even be able to get a ride in a snowstorm? Just because something is available in good conditions at a normal fee does not mean you can just stop planning your logistics and assume that service will be available all the time. That said, what the market-based alternative does crowd-out is those without the resources to pay spiked fares that may have lucked into a cab in previous circumstances.
- jtbigwoo 13y ago
  >> There are a number of competing apps for rides (or they would be built quickly to compete) and cars could freely undercut Uber. That's one possiblity. Another is that network effects would allow Uber (or Lyft or whatever) to dominate local markets since drivers and riders would flock to the most popular. The barrier or new entrants is going to get pretty high if Uber can snap up enough drivers.
  - sailfast 13y ago
    True, but there is no shortage of drivers even if they start snapping them up. For $20 a mile, I'll get in my car and pick you up. Uber would have to corner the market for all drivers by paying them off which is... expensive, and extremely unstable. If you required a CDL or other more involved permit to pick people up that might restrict supply but I don't anticipate demand outpacing supply of drivers if there is money to be made.
- metaphorm 13y ago
  transportation is a basic infrastructural need. there is profound social harm done when demand from the wealthy forces prices to rise to the point where poor and middle class people cannot afford it.
cypherpunks01 13y ago
"Let Uber put taxis out of business, as sometimes seems its intention, and there'd be no check on its "surge" pricing and no way at all for ordinary people to get around." No way at all for ordinary people to get around? Is this a joke? As far as I'm aware, ordinary people take ordinary transportation, like, you know, subways, buses, bikes and such.
- pessimizer 13y ago
  Are you trying to say that ordinary people don't take taxis?
  - vdaniuk 13y ago
    No, he doesn't. And it's pretty obvious what he means: that primary method of transportation for most people is public transport and price hikes during the scarcity periods will be a minor inconvenience as many other transportation means are available.
    - pessimizer 13y ago
      It's not that obvious to me. As a person who doesn't drive, taxis are crucial to my getting around, and I have to take one at least once or twice a month. edit: and to make it very clear, I can think of three jobs that I would have had to quit if reasonably priced taxis weren't available.
pmorici 13y ago
Sounds like a bunch of rich people complaining about having to pay the hired help extra to deal with undesirable work conditions to me.
- FireBeyond 13y ago
  Right? It’s telling, in a very Stanford Prison Experiment way, how that works. Take my girlfriend. She used to work as a nanny for a couple, two lawyers for the State. They were strictly middle-class, and paid the same to my GF as they would for daycare (my GF had taken care of their two children when in daycare, until the center closed). It was mutually beneficial, as my girlfriend’s own daughter was the same age as their kids and knew them. Seattle and surrounds are not known for heavy snow, and don’t have the infrastructure to deal with it. I work with the Fire Dept. Was called in when a big dump ended in a State of Emergency being declared. My girlfriend’s employers got a message from the State, not to come into work that day. That they could work from home, and were advised to stay off the roads, as they were particularly dangerous with over two foot of snow, re-freeze, and largely unplowed. They called my girlfriend (who lived with me, about 5 miles away) and, seemingly oblivious to what was coming out of their mouths: “We will be working from home today, as it’s too dangerous to drive. So we’ll need you to come in an hour earlier, thanks."
sardonicbryan 13y ago
I think the analogy here to price gouging during an hurricane is quite a stretch here. I don't think many would agree with "surge pricing" on essentials or transportation during Hurricane Katrina where the alternative might be death or extreme property damage. I don't see how that applies to the vast majority of Uber surge pricing scenarios. I have a friend who lives in Pac Heights and gets hit with surge pricing all the time, likely because few Ubers are willing to pick up customers there. He's switched to Flywheel, which works well and doesn't have surge pricing. Seems like everyone wins here. Meanwhile, I live in SOMA, rarely get hit with surge pricing, and pretty much exclusively use UberX/Uber.
- robrenaud 13y ago
  Uber tried to use surge pricing in the aftermath of Sandy in NYC, and was basically forced to pay the drivers the extra surge prices out of their own pockets due to the PR fiasco that ensued. http://blog.uber.com/2012/11/01/hurricane-sandy-pricing-update/ http://blog.uber.com/2012/11/01/hurricane-sandy-pricing-upda... Of course, this was only the aftermath. I am very skeptical that for hire taxis are a good way of saving lives in an emergency. I personally totally buy the economic argument for surge pricing. But they have a very PR problem of convincing people that it's useful and beneficial to everyone.
smackfu 13y ago
The dilemma for Uber here is that a 6x or 7x multiplier completely changes the market for a service. It's an increase from $30 to $200. If it was just a 2x multiplier, people would be much more accepting, since it would move from pricey to really pricey.
- sneak 13y ago
  It's not really Uber's dilemma. They warn people about the multiplier before accepting an order from them. This is a simple case of buyers not wanting to take responsibility for their own actions.
  - smackfu 13y ago
    I agree that we are only hearing complaints from people who went ahead with the purchase, and then had buyer's remorse the next day. Uber's bigger problem is all the people who got to the screen that said it was incredibly more expensive than usual, and walked away and started talking about what a rip-off Uber is and how it gouges people who are in need.
deleted 13y ago
[deleted]
the_watcher 13y ago
Price-gouging serves a purpose: it ensures that the service in question is not unevenly distributed to the first customer there. In situations like transit this advantage isn't as obvious as in situations like a gas shortage. Are cabs in the Bay Area regulated in terms of max prices? I end up avoiding Uber in surge times because basically every other option is cheaper.
sharemywin 13y ago
The bigger problem is customers opinion of the company and service. Great you got my business when I was over a barrel but I'll probably use someone else the other 99 times. Amazon keeps its pricing low for a reason. cutting fees during emegencies is how you build customer loyalty.
kubiiii 13y ago
What is cool with price gouging is that it makes standard pricing appear like an innovation premium user would pay for.
davidgerard 13y ago
Why price gouging is rare, even though economists, libertarians and other sociopaths love it: http://www.npr.org/blogs/money/2012/10/29/163861383/why-economists-love-price-gouging-and-why-its-so-rare http://www.npr.org/blogs/money/2012/10/29/163861383/why-econ... tl;dr normal people with functioning empathy consider it grossly antisocial and won't put up with that shit. If Uber wants itself regulated to hell, then the CEO just needs to carry on in this style.

29 points by ahmadss 13y ago

> Uber's defense is that it needed to charge so much more to encourage its drivers to stay on the job Maybe people would be more OK with it if Uber kept their commission flat, i.e. they get paid the same for each trip regardless of how much they are charging extra for the conditions. Not saying they have a duty to do this, just that from a PR point of view it would get rid of the assumption that they put prices up too much to increase their profits.

davidedicillo 13y ago

I found myself using other service more often when I see a surcharge. Especially for short rides, I prefer waiting and extra 5 minutes and spend half of the money.

apendleton 13y ago
I'm sure Uber would tell you that's exactly how it's supposed to work. The price increase drives some people to seek alternate modes of transport, which keeps the supply stable so it's still possible to get a ride if you're willing to pay the higher fare.
- aetherson 13y ago
  Wellllll.... Their general line is not "surge pricing reduces demand," but "surge pricing increases supply." Clearly, over here in reality, it does both, but they prefer understandably to emphasize the up-side. The question is, how much does it increase supply? My guess is that it doesn't increase it all that much. Uber does not, to my understanding, have a huge pool of irregular drivers who only occasionally go out onto the road during high surge pricing. They encourage their drivers to work full time, and most surge pricing (ie, not anomalous events like snowstorms) are at times of predictable high demand, when you'd expect most of their drivers to be on the road anyway. My guess is that surge pricing (especially surge pricing in excess of x2) is mainly a windfall for Uber and their drivers, and is less effective about increasing supply than their promotional material would like you to believe. Disclaimer: I work at Flywheel, an Uber competitor. I am not un-biased.
  - holograham 13y ago
    I'd speculate that some of this marketing is designed to lure drivers from other services.

wavefunction 13y ago

$94 11 minute Uber rides... This is why regulation of industry is not always an attempt to hold back the unbridled forces of "progress."

jowiar 13y ago
The goal of regulation is to discourage traffic jams, fights, and the like on the side of the street caused by negotiation over price. With Uber you have the opportunity to see the price before pressing the button. Ideally, there are multiple Uber-like systems which will hold prices down, with a Kayak-like service to choose between them.
- wavefunction 13y ago
  I thought it was to protect the consumer from things like... "price gouging." I agree with your "ideal" situation being ideal, though I guess I expect that service pricing will be "protected business data."
  - jowiar 13y ago
    There's nothing wrong with charging high prices for things that are in high demand and low supply. That's what encourages more suppliers to enter the market. There are two major situations that regulation needs to protect consumers from - asymmetric information and monopolies. Taxis are a major example of the former - that negotiating on the street would create traffic problems, and getting into the cab, then negotiating would create a major imbalance of power in the negotiation. An example of the latter would be if Uber was the only player in the transportation market (market share > some large %) and could charge what they want, and then said something like "the only way to book one of our vehicles is through our app, and you cannot build a system which lets you book either an Uber vehicle or non-Uber vehicle."
johngalt 13y ago
If one party is willing to buy and the other willing to sell, where is the issue? If you want regulated rates, wait for a cab. Intentionally using a premium service then demanding price controls makes you sound like the old man complaining that Starbucks coffee should cost a nickel.

jowiar 13y ago

It's a supply and demand thing - there's a choice -- Some people get cabs at sub-market rate, and some stand on the corner for an hour trying to get a cab -- or -- Some people pay more for a cab, while others balk at the price and find an alternative method of transportation. I've stood outside for an hour on a cold, snowy, windy New Year's eve/morn in Boston trying to get a cab... I'll take the price hike vs. the jockeying for sidewalk position, fights over who gets what cab, and other silliness. I think the drivers would too.

thenmar 13y ago
There's a choice now, and it's arguable a fair choice. But if Uber puts heavily regulated cab companies out of business, the alternative disappears. That raises some issues in emergency situations like bad weather. Transportation is to some extent a necessity - would you be in favor of stores selling water for $100 a bottle before a hurricane? That might be the price that the market decides but the result of that is people suffering simply because they weren't lucky to be born in the right family.
- holograham 13y ago
  you are missing the other half -- that high prices drive more market entrants. If the price of bottled Water is 100 dollars then more entrepreneurs will take the risk to transport bottled water to a hurricane prone area because of the profit incentive. This increase in market entrants would in turn drive down the costs to the point where the costs of transporting water to the area equals the ability of people to pay. If a business cannot profitably sell the water in the area then yes, humanitarian aid is probably needed short term (long term there probably needs to be analysis if the area is viable for humans to live in).
  - metaphorm 13y ago
    > that high prices drive more market entrants citation needed. I know this is dogmatic in laissez faire capitalist philosophy, but its really not clear that this occurs in all real markets.

saosebastiao 13y ago

If you aren't willing to pay more during peak times, you have to deal with the scarcity. This is problematic for things like food, water, and shelter during emergencies...not so much for luxury car rides across town.

gaius 13y ago
Or holidays during school holidays, another classic example of people not understanding supply-and-demand (and the need to keep the infrastructure running when there is no demand).
DigitalJack 13y ago
Scarcity is interesting. It's the root problem that government is trying to manage. With perfect knowledge, a central authority could have goods or services brought to those most in need. This is very alluring to politicians as they naturally make themselves the central authority, and people have a natural bias to believe they are right and will make the right decisions. Eventually you confront the problem of more people being in need than there are resources to satisfy. You can solve this by lottery or some qualification system or money. But someone somewhere will be left in the cold. This may be the poor or some schmuck who's birthday was in February. Sadly most economies don't take the "most in need" concept a a founding principle. It's about trade, where each participant feels they are in a better situation than before the trade. Money is used as an abstraction representing utility/usefulness of an object or work done. This is fine until you discover the person who has no money and apparently does not provide enough utility to get money (or enough money to live). This is where charity can take action. Basically a trade happens where one's position is worse after the trade and the other's is improved. Some believe this charity should be a private affair, some believe it should be compulsory.

tgrass 13y ago

There's a great interview with Mike Munger on Econtalk about the price mechanism during an emergency: http://www.econtalk.org/archives/2012/11/munger_on_john.html http://www.econtalk.org/archives/2012/11/munger_on_john.html

tgrass 13y ago

As I understand it, Uber's prices are listed prior to contracting for a ride. Uber's market is clearly the middle to upper income brackets. If it's understood that the price is time and conditions-variant, I fail to see how their pricing method is unethical.

smackfu 13y ago
They might benefit from being a bit more transparent with pricing. From a customer's point of view, the multiplier is just arbitrary ("it's busy, so we're charging seven times what we normally do"), and they have to trust Uber that it is being set fairly. If it gets excessively high, like it has in these recent cases, they start losing that trust in Uber, and move to a competitor.
- tgrass 13y ago
  I agree, that the firm might benefit from transparency; but the article stresses the need for regulation in the interest of the consumer, not the firm. This is how the price mechanism is supposed to work: it communicates inefficiencies over the long term.
sneak 13y ago
It's not unethical at all, it's just that mid-to-upper-class smartphone users in big cities have a wicked sense of entitlement. They approve a dialog that warns them of 7x pricing (not with a button, mind you - but by explicitly thumb-typing the string "7X" into a box!) and then they complain on twitter when their ride is $300 and call Uber crooks. The amount of entitlement found among the smartphone generation is staggering.

jdminhbg 13y ago

In my Uber/Lyft-less city we had a snowstorm last week and I needed to get to the airport. I spent 15 minutes letting my phone fruitlessly ring to various cab companies before giving up and digging my car out to drive and park for probably $90+ for the course of my trip. It's a curious human psychological tic that people think this is a better situation for me than looking at my phone's Uber app and deciding whether $90 for this particular ride would be worth it or not. And not just thinking that the latter is better for me, but that I need to be sheltered by law from encountering the former situation.

williamcotton 13y ago
The article is mainly about the shortcomings of pure unregulated capitalism, but thanks for your little story about yourself! Which makes your comment incredibly ironic, you know, because the underlying message is that a system driven only by individual perspectives is fatally flawed.
- Pinatubo 13y ago
  Beside missing his point completely, your comment is needlessly rude.
  - knowtheory 13y ago
    His point is a pretty meaningless hypothetical comparison. What if uber had been in his city and charged 4000$ for a ride to the airport? Does he live 60 miles from his airport? who the fuck knows? The story isn't even a useful anecdote, it's a Rorschach test for libertarians to project their biases onto.
    - jdminhbg 13y ago
      > What if uber had been in his city and charged 4000$ for a ride to the airport? Then I would have dug car out of the snow and drove to the airport. I would not have been any worse off. The difference is that the LA Times wouldn't write a story about me.

gabemart 13y ago

Are auctions unethical?

metaphorm 13y ago
depends on what is being auctioned
- jtbigwoo 13y ago
  True. Are we talking about auctioning beanie babies or dialysis treatments? I expect that folks would be much more accepting of the former than the latter. (To be clear, I'm not saying that Uber rides fall in the same category as dialysis treatments, just that folks are more sensitive to "unfair" pricing as the product or service gets more essential.)
  - metaphorm 13y ago
    Uber provides transportation. Transportation is much closer to the dialysis side of the spectrum than the beanie baby side.

bengarvey 13y ago

Experiments using the Ultimatum Game have shown that people hate feeling like they're being ripped off, no matter how much we think they should just act rationally and understand the circumstances. A great book on this is Priceless by William Poundstone.

sailfast 13y ago

This article asserts that if taxi cabs were run out of business by Uber then nothing would remain to keep Uber's prices in check. That is completely incorrect. There are a number of competing apps for rides (or they would be built quickly to compete) and cars could freely undercut Uber. I'd be the first to jump in and build an app that pulled each service's ride price to compare options. If price gouging continued, lower priced alternatives would flourish. I'm struggling to see why this demand-driven pricing when provided BEFORE you get in the car and make your purchasing decision is a problem. Without price gouging, would you even be able to get a ride in a snowstorm? Just because something is available in good conditions at a normal fee does not mean you can just stop planning your logistics and assume that service will be available all the time. That said, what the market-based alternative does crowd-out is those without the resources to pay spiked fares that may have lucked into a cab in previous circumstances.

jtbigwoo 13y ago
>> There are a number of competing apps for rides (or they would be built quickly to compete) and cars could freely undercut Uber. That's one possiblity. Another is that network effects would allow Uber (or Lyft or whatever) to dominate local markets since drivers and riders would flock to the most popular. The barrier or new entrants is going to get pretty high if Uber can snap up enough drivers.
- sailfast 13y ago
  True, but there is no shortage of drivers even if they start snapping them up. For $20 a mile, I'll get in my car and pick you up. Uber would have to corner the market for all drivers by paying them off which is... expensive, and extremely unstable. If you required a CDL or other more involved permit to pick people up that might restrict supply but I don't anticipate demand outpacing supply of drivers if there is money to be made.
metaphorm 13y ago
transportation is a basic infrastructural need. there is profound social harm done when demand from the wealthy forces prices to rise to the point where poor and middle class people cannot afford it.

cypherpunks01 13y ago

"Let Uber put taxis out of business, as sometimes seems its intention, and there'd be no check on its "surge" pricing and no way at all for ordinary people to get around." No way at all for ordinary people to get around? Is this a joke? As far as I'm aware, ordinary people take ordinary transportation, like, you know, subways, buses, bikes and such.

pessimizer 13y ago
Are you trying to say that ordinary people don't take taxis?
- vdaniuk 13y ago
  No, he doesn't. And it's pretty obvious what he means: that primary method of transportation for most people is public transport and price hikes during the scarcity periods will be a minor inconvenience as many other transportation means are available.
  - pessimizer 13y ago
    It's not that obvious to me. As a person who doesn't drive, taxis are crucial to my getting around, and I have to take one at least once or twice a month. edit: and to make it very clear, I can think of three jobs that I would have had to quit if reasonably priced taxis weren't available.

pmorici 13y ago

Sounds like a bunch of rich people complaining about having to pay the hired help extra to deal with undesirable work conditions to me.

FireBeyond 13y ago
Right? It’s telling, in a very Stanford Prison Experiment way, how that works. Take my girlfriend. She used to work as a nanny for a couple, two lawyers for the State. They were strictly middle-class, and paid the same to my GF as they would for daycare (my GF had taken care of their two children when in daycare, until the center closed). It was mutually beneficial, as my girlfriend’s own daughter was the same age as their kids and knew them. Seattle and surrounds are not known for heavy snow, and don’t have the infrastructure to deal with it. I work with the Fire Dept. Was called in when a big dump ended in a State of Emergency being declared. My girlfriend’s employers got a message from the State, not to come into work that day. That they could work from home, and were advised to stay off the roads, as they were particularly dangerous with over two foot of snow, re-freeze, and largely unplowed. They called my girlfriend (who lived with me, about 5 miles away) and, seemingly oblivious to what was coming out of their mouths: “We will be working from home today, as it’s too dangerous to drive. So we’ll need you to come in an hour earlier, thanks."

sardonicbryan 13y ago

I think the analogy here to price gouging during an hurricane is quite a stretch here. I don't think many would agree with "surge pricing" on essentials or transportation during Hurricane Katrina where the alternative might be death or extreme property damage. I don't see how that applies to the vast majority of Uber surge pricing scenarios. I have a friend who lives in Pac Heights and gets hit with surge pricing all the time, likely because few Ubers are willing to pick up customers there. He's switched to Flywheel, which works well and doesn't have surge pricing. Seems like everyone wins here. Meanwhile, I live in SOMA, rarely get hit with surge pricing, and pretty much exclusively use UberX/Uber.

robrenaud 13y ago
Uber tried to use surge pricing in the aftermath of Sandy in NYC, and was basically forced to pay the drivers the extra surge prices out of their own pockets due to the PR fiasco that ensued. http://blog.uber.com/2012/11/01/hurricane-sandy-pricing-update/ http://blog.uber.com/2012/11/01/hurricane-sandy-pricing-upda... Of course, this was only the aftermath. I am very skeptical that for hire taxis are a good way of saving lives in an emergency. I personally totally buy the economic argument for surge pricing. But they have a very PR problem of convincing people that it's useful and beneficial to everyone.

smackfu 13y ago

The dilemma for Uber here is that a 6x or 7x multiplier completely changes the market for a service. It's an increase from $30 to $200. If it was just a 2x multiplier, people would be much more accepting, since it would move from pricey to really pricey.

sneak 13y ago
It's not really Uber's dilemma. They warn people about the multiplier before accepting an order from them. This is a simple case of buyers not wanting to take responsibility for their own actions.
- smackfu 13y ago
  I agree that we are only hearing complaints from people who went ahead with the purchase, and then had buyer's remorse the next day. Uber's bigger problem is all the people who got to the screen that said it was incredibly more expensive than usual, and walked away and started talking about what a rip-off Uber is and how it gouges people who are in need.

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the_watcher 13y ago

Price-gouging serves a purpose: it ensures that the service in question is not unevenly distributed to the first customer there. In situations like transit this advantage isn't as obvious as in situations like a gas shortage. Are cabs in the Bay Area regulated in terms of max prices? I end up avoiding Uber in surge times because basically every other option is cheaper.

sharemywin 13y ago

The bigger problem is customers opinion of the company and service. Great you got my business when I was over a barrel but I'll probably use someone else the other 99 times. Amazon keeps its pricing low for a reason. cutting fees during emegencies is how you build customer loyalty.

kubiiii 13y ago

What is cool with price gouging is that it makes standard pricing appear like an innovation premium user would pay for.

davidgerard 13y ago

Why price gouging is rare, even though economists, libertarians and other sociopaths love it: http://www.npr.org/blogs/money/2012/10/29/163861383/why-economists-love-price-gouging-and-why-its-so-rare http://www.npr.org/blogs/money/2012/10/29/163861383/why-econ... tl;dr normal people with functioning empathy consider it grossly antisocial and won't put up with that shit. If Uber wants itself regulated to hell, then the CEO just needs to carry on in this style.