4 ms·
Well the assumption of supply adjustments to meet demand in real time that is given for Surge Pricing is just unrealistic. A driver must make a commitment (hour
by yuliyp 12y ago
Well the assumption of supply adjustments to meet demand in real time that is given for Surge Pricing is just unrealistic. A driver must make a commitment (hours or days before) to be available to drive at a given time. Of course they have no idea what the surge multiplier is, so they'll have to guess. As a result the number of cars on the road is driven by the _expectation_ of the multiplier, rather than the actual multiplier.
This affects the demand side too: people remember stories of people getting burned by huge surge multipliers, and as a result adjust their behavior (being more willing to call a normal cab, driving instead of taking a cab). Here again the actual surge multipliers matter less than the expectations. By providing reasonable estimates, they could set surge multipliers that would ensure a high supply of drivers and demand for them, instead of having the curves moved out of whack by overestimation.
- aristus 12y agoThis is a feature, not a bug. :) Uber has created a market with dynamic pricing, but manages to keep both ends of the transaction in the dark until the last possible moment. This information asymmetry is precisely why they are making money hand over fist.
- harryh 12y agoI don't understand why this information asymmetry is more important to their profits than the network effect of controlling a very widely used marketplace?
- aristus 12y agoThink ebay and all its network effect pixie dust, plus the ability to name your own price.
- harryh 12y agoWhat percentage of Uber's revenue comes from surge pricing?
- omonra 12y agoI'm with you. I think it's probably one of the 'things that could work better' but unlikely something the company makes much money from.
- aik 12y agoIt's a feature, and why passengers didn't even bother. It's a dangerous game. With the cost of ride essentially being an unknown, ranging from cheaper than a cab to many times the cost of a cab, I often wouldn't bother either. People prefer consistency in what they pay for an experience, and when it's inconsistent, I lose trust that the value will be consistent (ie. Uber for most people I believe is attractive if the experience is better or equal in cost to a cab, but terrible when the cost is significantly higher than the convenience/better experience.) At least with a cab I am (fairly) certain of the value.
- erok 12y agoIt's a "feature". :P In the same way that it is a feature that the cab driver doesn't have a permit or the proper insurance. Is this really how the new blackmarket is going to work? Do something illegal nationwide with average citizens running it and you are good to go? Maybe I am just being negative. Sorry.
- yuliyp 12y agoIt's a feature that optimizes for short term profit at the expense of the long term: memory of last year served to reduce demand this year, and memory of this year will serve to reduce supply in the future. Part of me wonders if they didn't tweak the surge multipliers in a misguided effort to appease drivers' expectations.
- didddler 12y agoIt appears that they tweaked surge to appease drivers, here's a conversation between an Uber driver and Uber's head of global operations. http://imgur.com/yG5Ny1Q http://imgur.com/yG5Ny1Q It's all speculative because how they implement surge is opaque.
- nerfhammer 12y agoGiven that supply and quantity demanded seemed badly mismatched this seems like a failure of the pricing mechanism, one which would not occur in a free market
- warfangle 12y agoI wonder if all of this could be alleviated by showing the current surge coefficient in the app...