[2009mobile]

The article describes Uber's surge pricing as a form of surveillance pricing, but this is misleading. The primary purpose of surge pricing isn't to maximize profit, it's to increase supply. Dynamic pricing in a 2-sided network is different than in retailing.

[salawat]

>The primary purpose of surge pricing isn't to maximize profit, it's to increase supply.

Your thinking is overly rigid here. An action can be multiple things at the same time. Uber's incentive is to maximize transactions per unit time window. You are correct in that surge pricing on a first level pass isn't about profit maximization. You have to go up a layer of a straction or two before that becomes the case. Uber has to increase supply to fulfill transactions for a signalled demand, signalled demand is high, thus signaling more profit to be made, therefore the surge while at first seeming like a negative signal to consumers, is still acting systemically as a mechanism to bring about profit maximization.

Hiding this type of thing from the end consumer, or not saying it out loud, is a favorite of the current batch of business people.

[dghlsakjg]

It isn’t just to increase supply, it also reduces demand. It’s a mechanism for finding a new market clearing price… that necessarily maximizes profit

[esseph]

> The primary purpose of surge pricing isn't to maximize profit, it's to increase supply.

Hm. This doesn't pass the sniff test for me.

If say 500 people take an Uber to a venue or need an Uber from the airport, increasing the price more often than not is just going to increase revenue. The price increase doesn't force you into an alternative choice if there are no alternatives.

Many places don't have substantial taxi or similar services, and public transit doesn't meet that same need with people in suburbs / ex-urbs / rural.

[nh23423fefe]

the price increase can incentivize more drivers thus increasing supply. conversely driving the price to zero would certain increase demand and eliminate supply.

i mean, if you posit inelastic demand, you dont get you pretend you derived it as a conclusion right?

[esseph]

> the price increase can incentivize more drivers thus increasing supply

But never high enough to meaningfully dilute or really in any way change demand, and by raising the number of drivers, the parent company ultimately still makes more profit.

This seems self reinforcing.

> i mean, if you posit inelastic demand, you dont get you pretend you derived it as a conclusion right?

I'm not pretending anything, I'm considering the reality on the ground when I travel across the US.

[nh23423fefe]

> But never high enough to meaningfully dilute or really in any way change demand

literally you restating inelastic demand assumption

> I'm considering the reality on the ground

oh, reality is on your side. whoops i didn't realize i was arguing with reality. so you are definitionally correct?

[victorbjorklund]

Also it decrease demand. Someone who is feeling ”eh maybe I’ll take an uber or the train” will be more likely to take the train.

[esseph]

Not an option in much of the US. I'd argue it's mostly a Bay Area and DC corridor thing.

[victorbjorklund]

Yea, but Uber is not only in US. US is a minority of the world.

[cuttothechase]

Well the same logic can be used to justify bias too. I am surge pricing a person of religion X or race Y because I am increasing the supply for All races / religion in a equitable way!

[cowpig]

Can you explain why they are mutually exclusive?