
Report says Uber surge pricing has a twist: some drivers flee - aceperry
http://www.sfgate.com/business/article/Report-says-Uber-surge-pricing-has-a-twist-some-6597012.php
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jackgavigan
Am I the only one that's concerned that Uber are trying to patent Supply &
Demand?

[https://www.google.com/patents/US20130246207](https://www.google.com/patents/US20130246207)

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mfringel
It's not 'supply and demand'; it's centrally-planned dynamic pricing that just
happens to be done by a private entity.

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austenallred
The patent is also very specific about how this is done. Sure, some of the
terms are broad: That's just how patents work nowadays.

When we filed a patent it was mostly to protect ourselves against other people
suing us for violating their patents. The entire system is fundamentally
broken.

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oneJob
Surge pricing is avoided by customers. Solution, never change price on
consumer side but have sliding payment to drivers. Increase flat consumer
charge / mile by $0.25 and then use algorithms to determine where / when heavy
usage is expected and increase pay to drivers during and briefly before.
Patent pending, of course.

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RobinL
This is interesting, but as an economist it immediately struck me that
something in this argument feels wrong.

Thinking it though, it may work, but there is a potential problem. You're
suggesting you expand the supply side in a surge by ensuring the the driver
makes more money. So that means the company makes more profit during non-
surge. But doesn't that open up an opportunity for a second company to come
along and charge lower rates during non-surge periods?

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JoeAltmaier
Oh! I know! Regulate so that only Uber can operate in a given market, maybe
issuing coins or tokens or medallions, anyway something so you know the driver
is legit and safe to use. Thus keeping the whole industry safe and reasonably
profitable for all those involved.

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austenallred
And then let the people who have owned the medallions gouge those who don't by
charging them $40,000/year to rent a car they don't even get to keep.

Get rid of any incentive to act in the customer's best interest: Make sure
that no drivers are compelled to go to less desirable areas, do a shift change
right at rush hour, allow drivers to reject the rides they don't want, create
no feedback loop, allow cash payments so they can pretend like the credit card
machine is broken for extra tips, allow drivers to rip off visitors who don't
know the area by taking longer and less direct routes, and don't increase the
number of medallions ever.

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JoeAltmaier
Half of that describes Uber precisely. So its not a panacea.

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austenallred
Which half?

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madeofpalk
I don't see this as a twist - it appears surge pricing is working exactly as
planned. When resources are scarce, it limits demand and ensure that there are
drivers available for those who really need it (who will pay).

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braythwayt
To elaborate on
[https://news.ycombinator.com/item?id=10477319](https://news.ycombinator.com/item?id=10477319):

Uber advertises surge pricing as a strategy to incentivize^H^H^H^H^H^H^H^H
_encourage_ drivers to become available in areas with high demand.

But if the study's results reflect reality, the surge pricing does not
encourage drivers to go to high-traffic areas, it simply drives demand down
until it is aligned with the supply of drivers in the area. Driving demand
down also discourages drivers from working the area, and thus some actually
leave, lowering supply further.

Is that bad? It depends on how you feel about companies being honest with
customers. A more accurate message on the app might be "Demand is through the
roof, but there are only enough cars for those who need a ride so much that
they are willing pay 1.5x the normal rate. Hurry before there are even fewer
cars and the surge price raises to 2x."

Likewise, if you feel companies should be honest with their subcontractors,
the message for drivers ought to be "Demand in this area is through the roof,
and the lucky few who will get riders before we drive demand down, will earn
2x the normal rate. The rest might not get any riders at all, as riders make
other plans or flee the area."

According to the article, they are working on tools to help drivers with the
latter proposition, but not the former.

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oldmanjay
I'm curious about what you are communicating with the incentivize/encourage
split. I presume from the presentation that you found it meaningful. Given
that your entire comment can be summed up as encouraging connotation
management, I'm wondering what you see in that word pair.

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braythwayt
Oh, it was a sidelong comment on the use of business jargon like
“incentivize,” when a perfectly good word like “encourage” already exists.

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dec0dedab0de
I think Uber is being smart here. Instead of being suckered into waiting too
long for a ride, the user knows it is their decision. I wish restaurants would
do this.

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dcarmo
If that's the case, it's actually pretty smart. Do you think it could work in
other fields (such as restaurants, as you mentioned)? I mean, would people be
ok with paying more in a restaurant that's crowded?

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redblacktree
Restaurants already do this, but they do it in reverse. Instead of higher
prices during peak hours, they offer discounts during off-peak hours.

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toast0
Of course drivers in a surge area flee, they probably have a passenger in
their car who wanted to go somewhere.

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nathancahill
Drivers disapper from the map when they pick up a passenger, so if the
researchers were able to see cars fleeing a surge area, the cars were empty.

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tim333
Looks like they are setting the price too high

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danieltillett
It depends on what the aim is, but if it is to maximise revenue then yes that
would be the obvious conclusion. I think the demand is just too small and
noisy to accurately price.

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Symmetry
I thought that Uber didn't get any of the extra surge price? In that case
they're just trying to clear up congestion as quickly as possible so the price
might be optimal from their prospective.

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potatolicious
Lyft is (was?) the one that doesn't take a cut of surge pricing ("Prime Time"
in their vocabulary). Lyft's cut is (was?) based on the standard fare, and the
driver got the entirety of the surge bonus.

I've heard that Lyft has since moved to a model where they take a percentage
of the surge price, but I can't seem to find any obvious sources corroborating
this.

Uber AFAIK has always taken their cut of the surge price.

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peterwwillis
> “Without surge pricing, Uber is not really Uber — you can’t push a button
> and get a ride in minutes,” an Uber economist and an Uber data scientist
> wrote in a blog post last month about a different report on surge.

> It analyzed what happened when a glitch caused surge to stop for 26 minutes
> in New York City on New Year’s Eve, Uber’s busiest night of the year.

Hmm. Call me crazy, but this exposes a pretty glaring hole in Uber's model:
the inability to hail a car by hand. If - at some point far, far in the future
- cabs become obsolete, how will you get a ride when either your phone is dead
or the Uber network no longer responds?

Unrelated: is it possible that at some point unscrupulous drivers might try to
pick up riders late at night in popular areas just by claiming they're Uber,
or having an Uber sticker of some kind on their car?

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wcummings
>this exposes a pretty glaring hole in Uber's model: the inability to hail a
car by hand

This is _precisely_ the privilege a medallion gets you.

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ascorbic
Nobody goes to that bar anymore. It's too crowded.

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jessriedel
Link to the actual paper is down, but this one is still working:

[https://consumermediallc.files.wordpress.com/2015/10/chen-
im...](https://consumermediallc.files.wordpress.com/2015/10/chen-imc15.pdf)

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bibinou
[http://www.ccs.neu.edu/home/cbw/pdf/chen-
imc15.pdf](http://www.ccs.neu.edu/home/cbw/pdf/chen-imc15.pdf)

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kordless
> Uber responded that the researchers couldn’t really see what was going on
> with drivers.

This is a great rationalization that can be trotted out at any time for a
variety of reasons. That we, as the customer, have no visibility into "what is
going on with the drivers" is an issue that needs to be addressed.

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arprocter
If we take Uber on their word that drivers do move towards the surge areas,
wouldn't that just create surges in the areas they were previously in?

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AshFurrow
“We’re data-driven as long as the data reinforces our pre-held ideas.”

