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Uber's "Route-Based Pricing" Predicts How Much You're Willing to Pay

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Re: Uber's "Route-Based Pricing" Predicts How Much You're Willing to Pay

#21

Post by wavefunction »

sebleon wrote: post #18
gsch wrote: post #12

> “Society is more willing to accept wealthy people paying higher fares,” said Chris Knittel, a business professor at the Massachusetts Institute of Technology. “But if the repercussion of lower fares in lower-income places is longer wait times, that’s probably what they want to keep an eye on." I can't help but recall all the times Uber or its defenders claimed that its supposedly uniform fare scale meant that it co…

Interesting, I hadn't heard that defense before. It seems like Uber's app-based hailing is the reason why poor neighborhoods are able to get serviced. Previously, no taxi driver would drive around in those areas - because of opportunity cost of higher fares in richer areas, and fears of getting robbed when there was tons of cash in the car.

Gypsy cabs exist for those reasons.

Re: Uber's "Route-Based Pricing" Predicts How Much You're Willing to Pay

#22

Post by baddox »

gshulegaard wrote: post #9
acchow wrote: post #6

Earlier quoted context omitted.

You're ignoring the existence of competition...

Not really, competition only checks this effect if the price-discrimination advantage isn't so compelling such that: 1) All firms start doing it...because what Producer wants to leave money on the table? 2) The firm that does it best gains a significant advantage over competitors thus leading towards non-competitive market conditions. And, from a purely speculative perspective, if the price discrimination advantage w…

> 1) All firms start doing it...because what Producer wants to leave money on the table?

That seems to just skirt around the issue. The basic (Econ 101) point of competition is that if all existing firms are making 100 units of profit, and a new firm can make 50 units of profit by offering an equivalent product at a lower price, then that new firm will take business from the existing firms.

Re: Uber's "Route-Based Pricing" Predicts How Much You're Willing to Pay

#23

Post by wavefunction »

sebleon wrote: post #18
gsch wrote: post #12

> “Society is more willing to accept wealthy people paying higher fares,” said Chris Knittel, a business professor at the Massachusetts Institute of Technology. “But if the repercussion of lower fares in lower-income places is longer wait times, that’s probably what they want to keep an eye on." I can't help but recall all the times Uber or its defenders claimed that its supposedly uniform fare scale meant that it co…

Interesting, I hadn't heard that defense before. It seems like Uber's app-based hailing is the reason why poor neighborhoods are able to get serviced. Previously, no taxi driver would drive around in those areas - because of opportunity cost of higher fares in richer areas, and fears of getting robbed when there was tons of cash in the car.

Gypsy cabs exist for those reasons.

Re: Uber's "Route-Based Pricing" Predicts How Much You're Willing to Pay

#24

Post by hkmurakami »

sebleon wrote: post #16

The flip side is that they can also predict what's the minimum pay an individual driver is willing to take. The airline industry has been doing personalized pricing for years - if you don't believe me, redo a flight search in incognito mode. It's interesting how Uber's other transgressions have place a magnifying class over all their other activity.

The sector I'm most curious about for this is the rental car industry.

Even more opaque than airlines.

Re: Uber's "Route-Based Pricing" Predicts How Much You're Willing to Pay

#25

Post by droopyEyelids »

acchow wrote: post #6
gshulegaard wrote: post #4

Earlier quoted context omitted.

It leads to consumer surplus being further and further converted into supplier surplus. Ultimately, this trend will approach 100% conversion so that there is no more consumer surplus and all surplus is realized by producers. It is an interesting sort of economic reality to speculate about...but I don't really have enough background to even credibly start.

You're ignoring the existence of competition...

Competition is an empty suit of armor at this point.

It's something we'll try to explain to our grandchildren and they'll try to understand it like we try to understand how people fought duels in the 17th century.

Re: Uber's "Route-Based Pricing" Predicts How Much You're Willing to Pay

#26

Post by gech »

BurningFrog wrote: post #17
gshulegaard wrote: post #9

Earlier quoted context omitted.

Not really, competition only checks this effect if the price-discrimination advantage isn't so compelling such that: 1) All firms start doing it...because what Producer wants to leave money on the table? 2) The firm that does it best gains a significant advantage over competitors thus leading towards non-competitive market conditions. And, from a purely speculative perspective, if the price discrimination advantage w…

Let me try to demystify what we're talking about, and show competition works fine even in this scenario. Let's say a ride is worth $20 for the consumer and $12 for the producer, for a total surplus of $8. If the price they agree on is $14, the consumer surplus is $6 and the producer surplus is $2. If the producer can be sure the consumer values the ride at $20, they can charge $19 and take home most of the surplus. N…

The only mystifying part is your abstract analogy that never seems to happen in reality

Re: Uber's "Route-Based Pricing" Predicts How Much You're Willing to Pay

#28

Post by samblr »

Once a friend of mine had famously quipped: Pick one profession and any country in world - rules of that business kind of remain same. Uber is a taxi company and they are acting like one.

Should not be the way forward for Uber-like (read other 'push a button') services should be decentralized / p2p (sure i've watched Silicon Valley this week) in a way such that service provider and payer are not screwed like this. (Next Richard Hendricks out there - are you listening to this mate ;)

Re: Uber's "Route-Based Pricing" Predicts How Much You're Willing to Pay

#29

Post by kirykl »

vkou wrote: post #20
sebleon wrote: post #16

The flip side is that they can also predict what's the minimum pay an individual driver is willing to take. The airline industry has been doing personalized pricing for years - if you don't believe me, redo a flight search in incognito mode. It's interesting how Uber's other transgressions have place a magnifying class over all their other activity.

I've just done a few Google searches for flights (SEA to SFO, LAX to NYC) while logged into two different google accounts, as well as Incognito mode. All the quotes were the same. I saw the same result on google.ca, and google.co.uk (When adjusted for exchange rates.)

The airline personalized pricing is (or used to be) based on 'purchase city' - they may be using a method to identify it that incognito mode doesn't break

Re: Uber's "Route-Based Pricing" Predicts How Much You're Willing to Pay

#30

Post by vmarsy »

BurningFrog wrote: post #17
gshulegaard wrote: post #9

Earlier quoted context omitted.

Not really, competition only checks this effect if the price-discrimination advantage isn't so compelling such that: 1) All firms start doing it...because what Producer wants to leave money on the table? 2) The firm that does it best gains a significant advantage over competitors thus leading towards non-competitive market conditions. And, from a purely speculative perspective, if the price discrimination advantage w…

Let me try to demystify what we're talking about, and show competition works fine even in this scenario. Let's say a ride is worth $20 for the consumer and $12 for the producer, for a total surplus of $8. If the price they agree on is $14, the consumer surplus is $6 and the producer surplus is $2. If the producer can be sure the consumer values the ride at $20, they can charge $19 and take home most of the surplus. N…

You're describing a "race to the bottom" those 2 competing producers would participate in. But we all know that when there's a quasi-monopoly with only 2/3 big players, they would "cooperate" to maintain the high prices.

Phone providers are a good example of this: In France for many years there was phone providers with extremely high prices: 50, 60, or even 70 euros per month for unlimited plans. They were all telling how their prices were fair, that they need infrastructure investments, etc etc. Then came a disrupting player: 'Free', who started charging 20 euros per month for the unlimited plans. Immediately, the 3 other players started offering 20-25 euros unlimited plans as well. The infrastructure hasn't suffered from this, 4G came as expected, and Free is now one of the major players.

What would happen in your example, is, unless a 'Free' equivalent shows up, is that they would all charge something around $19.

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