
Uber drivers say rideshare surge pricing backfired on New Year’s Eve - uptown
http://www.sfexaminer.com/sanfrancisco/uber-drivers-say-rideshare-surge-pricing-backfired-on-new-years-eve/Content?oid=2915795
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yuliyp
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.

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aristus
This 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
I don't understand why this information asymmetry is more important to their
profits than the network effect of controlling a very widely used marketplace?

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aristus
Think ebay and all its network effect pixie dust, _plus_ the ability to name
your own price.

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harryh
What percentage of Uber's revenue comes from surge pricing?

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untog
I'm not too surprised. Uber has created a perception that their service will
be unaffordably expensive at peak times like this, so people don't even check.

I actually _did_ check, and they were running at a 3.5x surge price in NYC. I
stood on a street corner for 30 seconds and flagged down a yellow cab easily,
so you might say their offer was lacking.

EDIT: reading the article again, I think there's something more of interest in
here. Drivers are annoyed at their lack of surge earnings, which makes me
wonder to what extent they're unhappy with how much they make at regular
prices, and how much they depend on surge pricing windows to really make
money.

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ethanhunt_
I saw something strange here in Seattle. Usually there is surge pricing
whenever there are few cars around. However I checked multiple times on New
Years Day at around 12:30AM and the surge pricing was >4.5x, _but_ there were
loads of UberXs around. Like, 10 cars within a couple blocks. And if I dragged
the gps marker 10 streets over, another huge cluster of cars would show up.

It looked to me like Uber overrode the algorithm and jacked up the prices
_really_ high, even though there wasn't such high demand for Ubers.

I regularly take Uber at 9AM and there will often be no cars in the area (wait
time of 8 minutes when usually it's <2 minutes) and the surge shows only 2.0x.

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meritt
Yup, sounds like you're right. What should have been an automated algorithm
based on supply & demand was instead hand-tuned by an idiot and fucked
everyone over.

Well done Uber.

~~~
potatolicious
This is why I like Lyft a lot more. They don't take a cut of the surge portion
of the fare - and removes the incentive for them to override the surge
multiplier for profits' sake.

~~~
adamio
This used to be the case, but Lyft now takes 20% of the total fare, including
surge

~~~
potatolicious
Aww crap. Guess I stick to regular taxis from now on...

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buckbova
> "There should be some regulation on the numbers of drivers you allow to
> Lyft," another commenter wrote. "Otherwise it may seem that you are taking
> advantage of the fact that we are not paid salaries, and you reap the
> benefits regardless if it effects us."

It will self regulate. If there isn't enough money in it, there will be less
drivers. When ridership goes up, it will attract more drivers.

Isn't that the point?

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untog
Assuming that these drivers have plenty of other job opportunities to go to,
yes.

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jinushaun
Uh... Did someone in the article seriously ask for Uber/Lyft to artificially
limit the number of cars on the road? Isn't that one of the problems with
traditional taxis? They never learn. Meet the new boss, same as the old boss.

I'm glad to be living in a city with a functional public transit system (NYC)
so I no longer have to be forced to be robbed by Uber (SF).

~~~
jrockway
> I'm glad to be living in a city with a functional public transit system

Unless you want to go to LaGuardia airport.

~~~
bradleyjg
The new Q70 makes it a lot better. Between it and the existing M60 it is not
much different than JFK.

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jrockway
I live in Brooklyn, so it's still a choice between a 20 minute drive or an
hour and a half on public transportation.

Actually, I think the M60 SBS should be the actual solution to this, but I
haven't ridden it yet. I fly out of JFK even if I have to connect somewhere.
(That's 18 minutes on LIRR for me.)

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bradleyjg
Well that makes sense then. Brooklyn to central and northern Queens is one of
the worst parts of the whole system. I live in Woodside and have friends in
Park Slope, so I definitely feel your pain.

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apendleton
I feel like on NYE, in particular, most people don't go out without already
having made a plan for how they're going to get home, so even if the actual
price turned out to be lower than expected, that might not have boosted demand
the way one might expect because many people had already made other
transportation arrangements in anticipation of Uber being unaffordably
expensive.

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revelation
_Flywheel offered a flat rate of $10 for all cab rides on New Year 's Eve. By
contrast, Uber sent a mass email warning riders that New Year's Eve would see
a spike in passenger demand, potentially skyrocketing prices to over $100 for
a ride after midnight._

If you want to have no customers, then yeah, this is how you would do that.

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badusername
Uber has their own side of the story here:
[http://blog.uber.com/cheersto2015](http://blog.uber.com/cheersto2015)

~~~
tarikjn
love that first graph, one can clearly read the geographical differences in
social behavior.

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davis_m
The criticisms of the Uber driver in the article seems to reflect that of the
traditional taxi driver when Uber came onto the scene.

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moonka
Looks like Uber has set up a system where either the riders will be unhappy
with high surges, or drivers will be unhappy with the normal pricing on big
nights. I never thought abut that side of it.

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Benjammer
That article was pretty much only comprised of anecdotes about drivers being
upset about something... They even directly say "hard numbers on tech riders
were not available."

I want to see the actual data and how Uber, or Lyft came out after NYE. Wasn't
the algorithm supposed to help stabilize the supply of Uber cars on the road?
I doubt it is designed simply to gouge people when demand is high.

It kind of sounds to me like the media pumped up this idea of "OMG look at how
screwed these few people were by surge prices!" Then Uber responded to the
critics by issuing warnings about high surge prices on NYE. This further
solidified this idea that the price would always shoot up on big nights no
matter what. So now you have everyone who's ever driven for Uber, plus a bunch
of newcomers all going out driving thinking they are all going to be cashing
in on $200 fares. Supply goes up, surge goes down.

Or maybe surge doesn't go all the way down. Uber would have no reason to make
the primary function of their algorithm to make drivers more money, or
stabilize driver income. They are trying to increase market share and make
money. Maybe they think the NYE demand is very inflexible and thus they can
restrict the surge pricing to stay above a certain level and not have much of
an effect on demand. This would, however, probably only exacerbate the initial
problem with oversupply, as more drivers would see surge pricing in effect and
start earlier, and stay out later.

There isn't even any anecdotal evidence in the article about the passenger
side of the experience, they only have stuff from Lyft/Uber drivers.

People act like Uber/Lyft should be nice to the drivers and treat them well,
when in reality they are clients, not prized employees. Uber's relationship
with the drivers is a business relationship that is very carefully maintained
and fine tuned. If you showed me a similar company that treated drivers very
well and was still able to keep prices from exploding, I would gladly use that
service over the current players, but it just seems to me that they are doing
what makes sense given the current marketplace. Isn't it supposed to be a lot
easier gig to be an Uber driver than a city cab driver?

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mikecb
I'm not exactly sure how Uber's surge algorithms work, but this seems like it
should be mitigated the smaller the price and time adjustments are made. It's
not like they don't have the data to do that.

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pacofvf
I checked the Uber app in my city at 12:30AM and the rate was 2.0x, closed the
app, reopened it until it was at normal 1.0x around 12:50AM, 4 USD was my bill
, I used it again at 3:30 AM and the surcharge was 1.5, used it anyway since I
was really tired, my bill was 6 USD.

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aaronharnly
A bidding system could conceivably address this, or just a more dynamic
pricing system that reduced fare multipliers as demand sagged. (Or does it
work this way already?)

Or, just fixed fares and sometimes you can't get a ride. Seems to work for the
rest of the transportation system.

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civilian
Yeah, the fare multipliers are already dynamic and NYE's riders got a good
deal. The issue is that we've had some highly-noticed surge pricing stories so
all of the customers figured "oh yeah, it's going to be horrible surge pricing
again and I'm going to be stranded at the FOO Bar after they close." So people
changed their plans to either include a DD, use public transit, use
traditional taxis, or go somewhere within walking distance.

Me and my friends stayed in and drank board games and played tequila.

~~~
lmm
I was with you until the tequila. Sax on new year's eve is a bad idea.

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msoad
I am a good example for this. I was planning to use Lyft but then scared of
surge pricing and drove my own car. I was lucky to find free street side
parking but even paying $40 for parking wouldn't be that bad compared to
Lyft/Uber rates that night.

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thinkpad20
Most people avoid taking their own cars because they're going to be getting
wasted, so I'm not surprised you were able to find street parking. I'm
guessing your New Years was a little less "festive" than others' :) (I hope it
was!)

~~~
msoad
There is always that one person who can't drink! :D

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ghshephard
The entire purpose of surge pricing is to ensure that there is _always_ a care
when you want one. The purpose is not profit maximization, but ensuring there
will never be a time that I go to Uber, request a vehicle, and not have one
appear within a reasonable period of time.

If Surge pricing is working then there should be a large number of empty cars
waiting for rides. Those cars are incentivized to show up by getting paid more
than they normally would for a ride of the same distance.

