[NoTeslaThrow]

I have heard a lot of people speak about dynamic pricing, but I have yet to hear any benefit to the consumer or society as a whole.

Basically any possible pitch for it is worse in every way than simple downward wealth redistribution.

[paxys]

Going by pure economic theory "dynamic pricing" actually benefits both buyers and sellers in a marketplace. There are plenty of cases where it makes sense – lunch menus at restaurants, grocery store coupons, retail bargain bins, dollar menus, happy hour deals, senior/youth/student discounts, even surge pricing in Uber & Lyft. Of course like with every aspect of economics how something is implemented matters a lot more than how it sounds on paper. Especially in the case of rideshare/food delivery, where the middleman has all the data and makes all the decisions.

[AlchemistCamp]

Yes. This is why getting an Uber is merely expensive instead of impossible on rainy days or on New Year's Eve.

Dynamic pricing makes it possible for both riders and drivers to respond to changes in supply and demand. If prices were static, many drivers would prefer to go to a New Year's Eve celebration themselves than work, but when it becomes their biggest paying shift of the year, they're a lot more willing to do it. Riders have to pay a bigger price if they want a ride at peak times, but it's still possible to get one when they really have a strong preference to.

[NoTeslaThrow]

Well that's certainly AN economic theory, but it feels a little polyannish/unreasonably hopeful. Like most of american macroeconomic discourse.

[mcmcmc]

Where exactly does macro come into play here?

[jowea]

Wouldn't perfect individualised dynamic pricing mean that the seller (Uber in this case) would get to capture the entire consumer surplus? Is that good?

[pbh101]

Yes but also that some people would be getting a service that they otherwise wouldn’t be able to afford. But there’s little/no incentive for a pure seller to do that, although for a marketplace like Uber there is more possibility for that, in order to maintain liquidity on the other side of the transaction. I listened to an interview where Uber CEO Dara K note there is always an incentive pool, and based on the market it is either riders or drivers who are getting the incentive money at any given time.

[nothrabannosir]

Ideally the remedy is competition.

[nradov]

Prices are always dynamic in every business. The only difference is in how frequently the price changes.

If you take your idea to the logical extreme then you're essentially arguing for permanently fixed prices. This is one reason why it's sometimes impossible to get a taxi in places where the rates are fixed by government edict.

[NoTeslaThrow]

I don't think we're referring to the same concept. Dynamic pricing implies charging two different concurrent customers different prices for the same good or service. The only place you can see this now are basically reward/promo/point programs, which while also gross (basically, making transactiobs cheaper for the rich) at least seem to have some proponents.

[lurk2]

> Dynamic pricing implies charging two different concurrent customers different prices for the same good or service.

That is price discrimination, not dynamic pricing. Price discrimination involves charging more or less based on the buyer’s perceived willingness and ability to pay. Dynamic pricing is based on fluctuations in consumer demand. A taxi ride at midnight is not the same as a taxi ride at noon; if there are proportionally fewer drivers available at midnight, fares will be higher at midnight.

The same principle may be applied in the restaurant industry; kitchen throughput has limits. If these limits are reached during peak hours, the restaurant can either raise prices during these hours or reduce prices outside of these hours to spread out the consumer demand, maximizing earnings during peak times while reducing kitchen idle time during off-peak hours.

[paxys]

You are thinking of price discrimination, which is a subcategory of dynamic pricing. Changing prices based on time of day, current demand, tiers/SKUs or really anything else is also collectively dynamic pricing.

[lurk2]

Price discrimination isn’t a subcategory of dynamic pricing. Dynamic pricing is equivalent to what is colloquially referred to as surge pricing, whereas price discrimination is based on the buyer’s perceived willingness and ability to pay.

Dynamic pricing could technically fall into the category of price discrimination if the discrimination is temporal (e.g. people who need a taxi at 8:00 AM pay more than people who need a taxi at 8:00 PM), but generally price discrimination refers to changes in price based upon anticipated demand, whereas dynamic pricing refers to changes in price based on actual demand.

[NoTeslaThrow]

I would probably call this "charge discrimination", which gives a clear indication which side of the party is empowered with this concept.

Still, wildly volatile pricing is also an excellent reason to avoid taxi apps. Why politicians have no desire to rein them in is baffling. I guess the stock market is really all that matters at the end of the day....

[rtkwe]

In theory surge pricing should bring more drivers into the area making the service better for riders. Not sure how much that actually works out in practice though without data only Uber really has.

[lurk2]

Surge pricing in theory incentivizes more drivers to operate during peak times, reducing wait times for passengers. If you’ve used these kinds of apps in regions where they aren’t popular, it can be quite common to not have anyone pick up your fare.

If you could bid up the price, you would be more likely to incentivize any idle drivers to pick up your fare. A driver might not be willing to get out of bed for a $10 fare, but the same driver might be willing to get out of bed for a $30 fare.