Uber price gouging? Get real


Tech driven Uber cab service got accused of price gouging. True or false? Welcome to the real world where supply and demand work to set prices.

Over the weekend, page view whore titles like Business Insider reported that Uber was price gouging its customers. Wrong. Here is what they had to say:

Saturday evening, while sleet and snow pounded the East Coast, Uber’s surge pricing kicked into effect. The prices were unusually high — seven to eight times normal charges in some places — and people took to Twitter to scream.

Sounds like a headline made in heaven. They went on to mine the Twitterverse in support of their argument. At the end of this headline grabbing piece, BI says:

“By *raising* the price you *increase* the number of cars on the road and maximize the number of safe convenient rides. Nobody is required to take an Uber, but having a reliable option is what we’re shooting for,” Kalanick wrote in January 2012. He points out this pricing structure is something all sorts of businesses do to manage spikes in demand, from hotels to airlines to car rental services.

Let’s take a reality check. As I understand the way Uber works, you get a quote in advance of taking the ride – which by the way  is likely to be far better than the shit tip cabs operating in many US cities – so you have the choice. Pick up or shut up?

As my good buddy Frank Scavo pointed out, this is economics 101. As he correctly said:

Let’s think about a few other examples that might have missed the attention of the cheap seat criticerati: A room at the Westin during Dreamforce cost $309/night plus tax, Today? $159. Go check short notice flights on your fave airline site. Better still, check the cost of the same property in a swish area rather than the slums next door.

Uber is disrupting the incumbancy among legislated city controlled taxi services. It offers a viable alternative that promises a better experience than the usual fare (sic.) Whether you chose to use Uber or not is entirely your choice as the paying customer.

Having hung around in San Francisco in the vain hope of finding a cab I want to get into, Uber offers an attractive, if expensive alternative. Given what I know about getting around the Bay Area, I’d happily pay the price. Does that apply in every city? No way. In London for example, I’d much rather take a ‘black cab’ where the chances of the driver knowing where I am going are far higher than the dopey ‘hire cars.’

If conditions are such that supply is limited (Uber drivers are all self employed and decide when they wish to work) then market dynamics dictate that prices will rise/fall based upon who is available. Uber is transparent about surge pricing. How many others offer that same service transparency?

The bottom line? As I said to some who moaned about this on Twitter: STFU. If you know in advance what you’re expected to pay then you have a choice. As someone who constantly wrestles humping piles of kit around in areas where I could use public transport I have to say I’d much prefer a friendly service for which I will happily pay a premium. Given the reluctance of many cabbies to hump anything other than a carry on you have to elevate the value of a friendly, inclusive service.

Everyone has choice but before moaning about Uber cost please realize – this is economics 101. If you don’t like it then walk away rather than take a ride and then bitch and moan. That kind of behavior makes you look like a Moaning Minny.

    Comments are closed.

    1. says:

      Maybe the twitterati believe their rides should be free, funded by advertising or whatever …
      I guess what is happening here is that people have been conditioned by regulation to expect taxis to be around at consistent prices whatever the conditions. This is exactly why regulation was introduced in the first place, to ensure even provision and prevent price gouging. The downside is that it also produces shortages of provision at times of high demand.
      I don’t see why Uber shouldn’t be able to co-exist with a regulated taxi service that offers a base level of provision to a city. People just have to stop expecting it to behave like a regulated service – it ‘tops up’ the base level with a price-driven supply. Is there a case for setting a minimum fare to protect the regulated service? That should be up to individual cities but there’s an argument for it, similar to the argument for minimum wage.

    2. says:

      philww Simple qus: Ever tried to get a cab at peak hours beyond the confines of a well known hotel? Ever felt that you were in anything other than a shit hole? Start to wonder if the cabbie has any clue where you’re going? – Uber disprupts all these dimensions.

    3. says:

      dahowlett wrote: Uber disprupts all these dimensions. 
      Which is fine if you can afford the premium when there is one. Cities also depend on shift workers who need access to a consistently priced service that may not be so salubrious but at least gets them home.

    4. says:

      philww That’s the economics 101 thing …as for the rest,,,when they chose to turn up without a scowl as though they’re doing you a favor, That’s the space Uber is filling.

    5. VivekRamgopal says:

      fscavo Scobleizer dahowlett completely agre -that’s why I’m making a choice to use taximagic instead. uber has been a 4x premium lately

    6. plestik says:

      jelleprins Is dit het beste wat je te bieden hebt? “Je kan het ook niet gebruiken”? AKA het domste argument voor vrije marktwerking ooit?

    7. jelleprins says:

      plestik als het sneeuwt wil iedereen ineens met de taxi, en voor de chauffeurs is het gevaarlijker rijden. Waarom zou je niet meer betalen?

    8. plestik says:

      jelleprins Je hebt een auto-ongeluk gehad, en je zit in de eerste hulp, het is zondag, waarom zou je niet meer betalen?

    9. jelleprins says:

      plestik get extra geld gaat ook niet naar Uber, maar naar de chauffeurs. Dat zijn zelfstandige ondernemers.

    10. jelleprins says:

      plestik daar zijn aparte wetten voor in nl. Chauffeur verplicht je mee te nemen, ook als je geen geld hebt. Kosten krijgen ze vergoed

    11. plestik says:

      jelleprins Het maakt mij niet uit naar wie het geld gaat. Het gaat er mij om dat er misbruik wordt gemaakt van een uitzonderlijke situatie.

    12. jelleprins says:

      plestik ook als je hun bekleding onder bloed. Appels & peren?

    13. plestik says:

      jelleprins Het is hetzelfde argument. Wij zijn het waarschijnlijk niet over eens of een vrije markt een goede of een slechte zaak is.

    14. jelleprins says:

      plestik jij wil chauffeurs verplichten te werken met slecht weer?

    15. plestik says:

      jelleprins Nee hoor. Ik wil ze verbieden een extreem hoog tarief te hanteren.

    16. jelleprins says:

      plestik dan kan het niet uit om te rijden en strand iedereen. Bij Sandy was zelfde geval… Benzine was veel duurder + 8u wachtrij bij pomp

    17. plestik says:

      jelleprins Ik vind dat niet erg. Ik vind het belangrijker dat vervoer voor iedereen, op elk moment, net zo betaalbaar is.

    18. plestik says:

      jelleprins (Het lijkt me trouwens ook geen goede zaak als chauffeurs onverantwoorde risico’s gaan nemen vanwege die hoge tarieven).