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Surge pricing is necessary for more important goods, or else there will be a shortage! When there is a hurricane, and the government declares a ban on "price g

Surge pricing is necessary for more important goods, or else there will be a shortage! When there is a hurricane, and the government declares a ban on "price gouging," then there is inevitably a shortage on things like gasoline, water, food, etc, because people by more than they need. When these goods cost more, people will tend to by only as much as they need. A sudden increase in demand should be met with a corresponding increase in price, but that is not allowed to happen. Furthermore, if the price of water, gas, and food goes up, then it is profitable for people to drive hundreds of miles in trucks with those goods to sell them, thus increasing the supply. In the case of Uber and Lyft, surge pricing sorts out who really wants the rides. You might rethink going to the mall or the bar during surge pricing because you are competing with people who need those rides much more. If surge pricing was banned, then a traveler might not be able to get home from the airport because someone wanted an Uber ride to a sports bar to watch a football game.

anigbrowl 12y ago
In the case of Uber and Lyft, surge pricing sorts out who really wants the rides. No it doesn't - it sorts out who really wants the ride and can pay the price. Like many things in economics, laws of supply and demand are expressed ceteris paribus - all other things being equal. When everyone has the same amount of money, then demand pricing does indeed reflect who wants a good or service more. But in the real world this isn't true, so the idealized law does not accurately model real economic behavior and thus you shouldn't build on such a shaky foundation. One reason that regulators impose price controls on taxi services is to give people with lesser income a degree of predictability about what a taxi ride will cost. The downside of this is indeed shortages, but insofar as time is fungible surge pricing leads to shoratages as well, it's just that they only affect poorer people who have to wait for the richer people to exhaust their demand. If surge pricing was banned, then a traveler might not be able to get home from the airport because someone wanted an Uber ride to a sports bar to watch a football game. That really makes no sense. If a sufficiently exciting game is on then people may be willing to pay top $ to be taken to sports bars and make the ride from the airport unaffordable. Indeed, given the relative scarcity of football games to plane flights, surge pricing seems more likely to occur in response to a popular sporting event than a flight arrival. I'm perplexed as to why you assume the air traveler is willing or able to pay more (although we can easily understand wanting to take a cab instead of a bus or train after a tiring journey), or why you assume that this would necessarily lead to a more economically efficient result. As a purely anecdotal observation, I've never had a problem getting a cab at an airport, and only rarely at a train station. Cab drivers also like predictability and while they might be able to make more via surge pricing during very busy periods, there's also value in having places where the demand is very predictable, like transit infrastructure. Like everyone else, cab drivers have different priorities - some may be happy to chase demand, others may need to work fixed hours because of family or contractual commitments, and want less income volatility. I'm not railing against demand-based pricing here, I'm just pointing out that the real world is more complex than just supply and demand.

anigbrowl 12y ago

In the case of Uber and Lyft, surge pricing sorts out who really wants the rides. No it doesn't - it sorts out who really wants the ride and can pay the price. Like many things in economics, laws of supply and demand are expressed ceteris paribus - all other things being equal. When everyone has the same amount of money, then demand pricing does indeed reflect who wants a good or service more. But in the real world this isn't true, so the idealized law does not accurately model real economic behavior and thus you shouldn't build on such a shaky foundation. One reason that regulators impose price controls on taxi services is to give people with lesser income a degree of predictability about what a taxi ride will cost. The downside of this is indeed shortages, but insofar as time is fungible surge pricing leads to shoratages as well, it's just that they only affect poorer people who have to wait for the richer people to exhaust their demand. If surge pricing was banned, then a traveler might not be able to get home from the airport because someone wanted an Uber ride to a sports bar to watch a football game. That really makes no sense. If a sufficiently exciting game is on then people may be willing to pay top $ to be taken to sports bars and make the ride from the airport unaffordable. Indeed, given the relative scarcity of football games to plane flights, surge pricing seems more likely to occur in response to a popular sporting event than a flight arrival. I'm perplexed as to why you assume the air traveler is willing or able to pay more (although we can easily understand wanting to take a cab instead of a bus or train after a tiring journey), or why you assume that this would necessarily lead to a more economically efficient result. As a purely anecdotal observation, I've never had a problem getting a cab at an airport, and only rarely at a train station. Cab drivers also like predictability and while they might be able to make more via surge pricing during very busy periods, there's also value in having places where the demand is very predictable, like transit infrastructure. Like everyone else, cab drivers have different priorities - some may be happy to chase demand, others may need to work fixed hours because of family or contractual commitments, and want less income volatility. I'm not railing against demand-based pricing here, I'm just pointing out that the real world is more complex than just supply and demand.