During a recent East Coast snow storm, car service Uber got into hot water with various media outlets and the general public because due to a dramatic spike in demand the company announced, and got away with, surge pricing as high as 6x its normal rates.
As often happens, those most shocked by this outcome were pundits who have a problem with grasping the simplicity behind supply, demand and equilibrium pricing: if you don’t like Uber’s rates, use the competition. There is no competition? Then you are stuck with Uber’s rates, ethical concerns about price gouging and lack of government subsidies (for now) aside. Simple.
And as long as there is no futures market allowing over the horizon surge price hedging, this pattern will continue (incidentally, with Wall Street’s ingenuity for financial innovation we are surprised nobody has offered said futures market yet).
However, since no matter what, there will be yet another outcry against Uber tonight, mostly by its most fervent customers and the same confused media outlets, the company has preempted the sound and the fury, and has preannounced just what times riders can expect to pay up to 6x (or more) their usual fare as they contemplate going from point A to point B across the various metropolitan centers in which it operates.
To wit:
New Year’s Eve is upon us and we want to give you some quick pro tips for getting around with Uber. This New Year’s Eve we’ll have a record number of cars on the road ready to get you where you want to go. But, that doesn’t change one simple fact: on NYE, everyone wants to move around the city at exactly the same time!
We use surge pricing to help solve this problem. Higher prices bring more cars onto the system when you need them most, and prices return to normal as soon as there are enough open cars. When drivers are paid more to log on to Uber, they complete more trips on Uber.
But you can avoid the peaks of surge pricing with good timing on when you travel. Check out our smart tips below, and don’t forget you’ll always know the price before you request.
So for any enterprising business that seeks to steal away Uber’s client base, the best time would be when the backlash against Uber would be the highest, i.e., when the highest surge fares will be in effect. Uber has been kind enough to let everyone know in advance when this will be.
Capitalism (for those who remember how it works): take it away.
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via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/EZLk8zAU_gM/story01.htm Tyler Durden