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I think what's wrong with this article can be summed up in response to this statement: > At the movies, for instance, prime-time tickets aren’t presented as a

I think what's wrong with this article can be summed up in response to this statement: > At the movies, for instance, prime-time tickets aren’t presented as a few dollars more than the normal price—rather, matinees are presented as a few dollars less. When American introduced dynamic pricing, it framed the 21-day advance-purchase requirement as a chance to buy “super-saver” fares. And happy hours at bars are, similarly, framed as a markdown from the regular price. These framing devices don’t change the underlying economics or price structure, but they can have a big impact on customer reaction. The difference between Matinee / Happy Hour (Discounts) and Surge Pricing (Gouging) is not a framing device, it is a fundamental difference. One says, "There is a basic price for this product or service which is fundamentally part of our business plan and represents the cost of doing business and some reasonable profit, but when the resource is under-utilized or we want to generate business, we will offer it at a discount - a price which we could not afford to offer at all times." The other says: "We are going to charge more when we can get it." I do agree that Uber would be better off not taking a cut of the surge pricing, that would make it a clearer incentive directly to the driver, but in that case why not offer a bidding arrangement? It is fundamentally about allocating scarce resources only to the wealthy, and creating an economy where people who are not wealthy rely on that, rather than a simple and fair wage. I'm usually pretty soft on Uber compared to Airbnb, I am no friend of the Taxi industry, but surge pricing is shameful.

dnautics 12y ago
Lyft tried Happy Hour and it didn't work so well, because it's difficult to create demand for something where people have specific use cases that are temporally and geographically constrained. It did motivate drivers to get off the road, which would be 'good' for connecting supply and demand but really drivers left permanently. Think about it this way: So what is the problem with allocating scarce resources to the wealthy. Especially in this case, why should you be entitled to an Uber ride? You have plenty of other options, the easiest of which is 'wait for just a little bit until the surge dies down' (which is what you most likely would have done if the allocation were done by queue). Finally, if you're charging the wealthy more, that's great! Because you're redistributing their wealth away from them.
pdonis 12y ago
> "There is a basic price for this product or service which is fundamentally part of our business plan and represents the cost of doing business and some reasonable profit, but when the resource is under-utilized or we want to generate business, we will offer it at a discount - a price which we could not afford to offer at all times." So you think that is what the "regular" price of movies, etc. means? There may be some instances where a "discount" price means selling at a loss (clearance prices for clothes to clear the racks for the next season come to mind), but in most cases (and I'm certain that movies, for example, fall into this category), the "discounted" price still generates a profit. The reason the seller does it is precisely that: more profits, by allowing additional profit-generating sales to happen that otherwise would not happen. In a case like movies, it's true that there is another element: a matinee movie is not quite the same product as a movie in the evening, for a variety of reasons (for example, a dinner and movie date is more romantic to most people than a lunch and movie date). Theaters can charge more for evening movies because those movies are worth more to the customers. But this just emphasizes that the difference between your two cases is not really a difference. The cost to the theater of showing a matinee is basically the same as the cost of showing an evening movie, so the fact that evening movies are worth more to customers means that the theater is simply charging more when they can get it--i.e., when the product is worth more to customers, so they will pay more. > It is fundamentally about allocating scarce resources only to the wealthy If this were true, then, for example, movies would only be available to the wealthy, since, as I've just shown, movie theaters charge more when they know customers will pay more. In fact, price discrimination (which is the usual term in economics for what we're discussing) increases the availability of products to everyone, precisely because it allows the seller to adjust prices (and possibly the product, as with matinees vs. evening movies) according to what customers are willing to pay. A society in which prices had to be fixed according to your first rule--"the cost of doing business and some reasonable profit"--would be a society in which products were less available, and in which being wealthy would confer more of an advantage than it does in our current society.

dnautics 12y ago

Lyft tried Happy Hour and it didn't work so well, because it's difficult to create demand for something where people have specific use cases that are temporally and geographically constrained. It did motivate drivers to get off the road, which would be 'good' for connecting supply and demand but really drivers left permanently. Think about it this way: So what is the problem with allocating scarce resources to the wealthy. Especially in this case, why should you be entitled to an Uber ride? You have plenty of other options, the easiest of which is 'wait for just a little bit until the surge dies down' (which is what you most likely would have done if the allocation were done by queue). Finally, if you're charging the wealthy more, that's great! Because you're redistributing their wealth away from them.

pdonis 12y ago

> "There is a basic price for this product or service which is fundamentally part of our business plan and represents the cost of doing business and some reasonable profit, but when the resource is under-utilized or we want to generate business, we will offer it at a discount - a price which we could not afford to offer at all times." So you think that is what the "regular" price of movies, etc. means? There may be some instances where a "discount" price means selling at a loss (clearance prices for clothes to clear the racks for the next season come to mind), but in most cases (and I'm certain that movies, for example, fall into this category), the "discounted" price still generates a profit. The reason the seller does it is precisely that: more profits, by allowing additional profit-generating sales to happen that otherwise would not happen. In a case like movies, it's true that there is another element: a matinee movie is not quite the same product as a movie in the evening, for a variety of reasons (for example, a dinner and movie date is more romantic to most people than a lunch and movie date). Theaters can charge more for evening movies because those movies are worth more to the customers. But this just emphasizes that the difference between your two cases is not really a difference. The cost to the theater of showing a matinee is basically the same as the cost of showing an evening movie, so the fact that evening movies are worth more to customers means that the theater is simply charging more when they can get it--i.e., when the product is worth more to customers, so they will pay more. > It is fundamentally about allocating scarce resources only to the wealthy If this were true, then, for example, movies would only be available to the wealthy, since, as I've just shown, movie theaters charge more when they know customers will pay more. In fact, price discrimination (which is the usual term in economics for what we're discussing) increases the availability of products to everyone, precisely because it allows the seller to adjust prices (and possibly the product, as with matinees vs. evening movies) according to what customers are willing to pay. A society in which prices had to be fixed according to your first rule--"the cost of doing business and some reasonable profit"--would be a society in which products were less available, and in which being wealthy would confer more of an advantage than it does in our current society.