This is all moot any ways. Town cars are allowed to pick up any passengers during the crisis. Effectively unleashing a whole lot more supply. As well town cars and yellow cabs are now allowed to pick up multiple passengers going to different locations while continuing to run the first passengers meter. I don't agree with this policy at all. You try getting an Uber car on a Saturday night it's not "surge pricing" when something goes up 3x times, it's just disgusting even more so during the current situation.
Uber Reverts Back to Surge Pricing in New York After One Day
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Re: Uber Reverts Back to Surge Pricing in New York After One Day
#22In a disaster situation if there is no elasticity between price and supply then price gouging laws (social or legal) make a lot of sense. For example, if there's a fixed amount of water around regardless of price people shouldn't be able to raise prices. But in this case there IS elasticity between price and supply, right? Uber is claiming that they'll deliver better service by increasing prices, because supply will…
Even if there is no additional supply available, there still could be some benefit. If the price of gas were far higher, people may not fill up their tank all the way and only purchase what they really need. So instead of the first X people getting full tanks and the next Y people getting nothing from an empty gas station, in some scenarios everyone could get a smaller amount. However, the issue of poor people not ha…
You highlight really good points. I guess at scale the government does exactly what you propose (step in and allocate supply per person), for example rationing in World War 2.
Re: Uber Reverts Back to Surge Pricing in New York After One Day
#23This is all moot any ways. Town cars are allowed to pick up any passengers during the crisis. Effectively unleashing a whole lot more supply. As well town cars and yellow cabs are now allowed to pick up multiple passengers going to different locations while continuing to run the first passengers meter. I don't agree with this policy at all. You try getting an Uber car on a Saturday night it's not "surge pricing" when something goes up 3x times, it's just disgusting even more so during the current situation.
Re: Uber Reverts Back to Surge Pricing in New York After One Day
#24Here's my question, gas stations are closing here in NJ when running out of gas. Why aren't they jacking up the price to astronomical rates? There are lines for miles to the gas stations that have electricity. Is this a failure of capitalism in the face of human compassion or what?
Is this a failure of capitalism No, not at all. All of the gas is in the hands of people who bought it. The supple constraints are not problems of incentives, they are problems of physics. Roads are down, plant is not working, traffic, security, etc. The reason anti-gouging laws exist is because jacking up prices has no benefit. It just keeps the poor people from having access to resources. 10 gallons of gas to a ric…
The idea that "jacking up prices" has no constructive purpose is strictly incorrect . When you fix prices on gas, and the relative value of gas shoots up, gas gets allocated to the people whose time is least valuable. When you allow gas prices to float in the same situation, gas gets allocated to the people whose time is most valuable.
Neither allocation is optimal; it is indeed unfair for all the gas to go to investment bankers. But that doesn't make it efficient or even fair for all the gas to instead go to the people who can get to the station earliest and wait in lines the longest.
Equally importantly, when you fix prices instead of allowing them to float, you enable hoarding. People get gas who don't need the gas, because they're risk averse and overestimate the likelihood that they'll use up what they already have. So gas quickly runs out everywhere. If you leave the fixed price in place for long, eventually all the value that would have been captured by the station owners instead gets captured by the grey market (and the deadweight losses involved in transferring gas to that grey market).
It's obviously not good social policy to allow gas station owners to charge $100/gallon for gas during a disaster. But it also seems pretty silly for prices to be capped at 10% of the pre-disaster spot price. Gas could easily float up to $10, $15/gallon (ie: the price of gas in Europe), motivate stations to find creative ways to supply that suddenly lucrative market, dampen the consumer urge to fill their tanks to 100%, and not bankrupt anyone (Americans famously overestimate the impact of gas prices on their daily lives).
Re: Uber Reverts Back to Surge Pricing in New York After One Day
#25Here's my question, gas stations are closing here in NJ when running out of gas. Why aren't they jacking up the price to astronomical rates? There are lines for miles to the gas stations that have electricity. Is this a failure of capitalism in the face of human compassion or what?
Strict capitalism is heartless, and ruins society. If the only way to share is through dollars, the majority of the burden is placed on the poor. We pretend that capitalism is foundational because it is an easy way to control the vast complexity of resource sharing, but it isn't sufficient for a healthy civilization. Strict capitalism is a third world country, with all security and resources devoted to those with personal wealth.
Re: Uber Reverts Back to Surge Pricing in New York After One Day
#26Good! Living in NYC boroughs there are little/no taxis, so we have to rely on car services. Since Sandy they are all consistently booked solid (provided you can even get them on the phone: most are "busy" forever).
Yet, with Uber dynamic pricing, I have been able to get a car when needed. Yes, I paid more - but at least I got a car that I wasn't going to get otherwise. Awesome!
Re: Uber Reverts Back to Surge Pricing in New York After One Day
#27Seems like the main alternative to increasing prices is `it's not sustainable for us to run at all until this is cleaned up'. Is that a suitable alternative?
If I were them, I would sink some of that massive VC into paying the difference as marketing. Keep prices stable, but ration rides based on how often people have used uber. ie, attract as many possible new customers.
Re: Uber Reverts Back to Surge Pricing in New York After One Day
#28In a disaster situation if there is no elasticity between price and supply then price gouging laws (social or legal) make a lot of sense. For example, if there's a fixed amount of water around regardless of price people shouldn't be able to raise prices. But in this case there IS elasticity between price and supply, right? Uber is claiming that they'll deliver better service by increasing prices, because supply will…
NYC has been allowing black cars to pick people up off the street during the crisis, so there isn't a shortage because of "medallions". There's a shortage because 5 million daily subway riders have to find alternate forms of transportation.
Re: Uber Reverts Back to Surge Pricing in New York After One Day
#29Earlier quoted context omitted.
Is this a failure of capitalism No, not at all. All of the gas is in the hands of people who bought it. The supple constraints are not problems of incentives, they are problems of physics. Roads are down, plant is not working, traffic, security, etc. The reason anti-gouging laws exist is because jacking up prices has no benefit. It just keeps the poor people from having access to resources. 10 gallons of gas to a ric…
The idea that "jacking up prices" has no constructive purpose is strictly incorrect . When you fix prices on gas, and the relative value of gas shoots up, gas gets allocated to the people whose time is least valuable. When you allow gas prices to float in the same situation, gas gets allocated to the people whose time is most valuable. Neither allocation is optimal; it is indeed unfair for all the gas to go to invest…
No, Not really. What's strictly incorrect are naive assumptions that the standard behavioural assumptions of "economics" hold in a disaster. The basics: truth telling, promise keeping, etc. The purpose of anti-gouging laws is a rational anticipation of Opportunism.
http://en.wikipedia.org/wiki/Opportunism
Opportunism is not dealt with by economics (assumed != existent), except obliquely. It is the providence of political economy, law and economics, and other areas that focus on the political Institutions that allow "rational-choice" econonmics to actually be logically rational. Some of these ideas are variants of: "I've got your back" in a disaster, so you can trust people to do the right thing, to avoid lord-of-the-flies.
While I appreciate your analysis, its important to keep an eye on the sandbox in which the black box sits. With 3m people without power, and with people losing their homes, no electricity, no cell etc, its more valuable to society to avoid over-generalizations of "rich people" are more important than "poor people" when all of the ATMs are broken, the surveilance cameras don't work, and the police stations are flooded, etc.
Thats just common sense and street smarts, really. Its not really a political or economic argument in the traditional sense (especially the partisan sense). Its more of a point about when the shit hits the fan, you preserve the fabric of society first. Sort of like the 80/20 rule. Having a "basically functional" market is better than having a "perfectly functioning" one but especially is better than having the market looted or burned down (etc). That being said, hording and etc are equally anti-social. Often times what you see is that the quantities will be limited (to say, 8-10 gallons of gas, etc). For this very reason. Those are fair and good points to raise.
Re: Uber Reverts Back to Surge Pricing in New York After One Day
#30In a disaster situation if there is no elasticity between price and supply then price gouging laws (social or legal) make a lot of sense. For example, if there's a fixed amount of water around regardless of price people shouldn't be able to raise prices. But in this case there IS elasticity between price and supply, right? Uber is claiming that they'll deliver better service by increasing prices, because supply will…
Maybe I'm misunderstanding your point, but your first sentence seems completely illogical.
If there is a fixed supply of water, what better mechanism than price exists to efficiently determine the best use of that water? Not allowing people to raise prices means you end up with wildly inefficient allocation of resources (i.e. first guy in line says, "Man, there's a remote chance this flooding lasts for 2 weeks. Water is the same price it was pre-hurricane? I'll take all you've got.")
Similarly, not allowing people to raise prices actually decreases supply. If you remember post-Katrina, there were numerous "anti-price gouging" orders enacted. The result? All the people who were willing to drive a truck full of generators (and plywood, and water, etc. etc.) 1000 miles to make a few bucks/hundred bucks profit per unit now had no incentive to do so. And so they didn't. And the people of New Orleans suffered needlessly.