Uber & Surge Pricing

Uber, a taxi- and black car- hailing service, implements “surge pricing,” which is basically the model discussed in lecture where more is charged for busier hours and vice versa. The same ride would cost more during rush hours and less otherwise, with the price being determined by an algorithm that takes into account the current demand for their service.

Obviously, during Hurricane Sandy, demand went skyrocketing in NYC, as most transport services crashed. In fact, a 7.67 mile ride on November 2nd cost $219, when it would normally have cost around $110. (http://gothamist.com/2012/11/04/uber.php) Granted, customers were not pleased with having to pay double their usual price during this time of turmoil.

And then Uber did something nobel. They shut off their surge pricing algorithms, allowing customers to ride at “the standard 1x fare avoiding surge pricing for most of the day after Sandy.” (http://blog.uber.com/2012/11/01/hurricane-sandy-pricing-update/) At the same time, Uber doubled the amount they were paying their drivers to (successfully) provide incentive for more cars to be out on the roads for longer. Of course, this was not a sustainable model, and later Uber had to reinstigate surge pricing, but they “waived all of its own fees with 100% of the fare going directly to the drivers helping New Yorkers move around the city.”

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