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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

#31

Post by swohns »

adamsmith wrote: post #10

In 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…

I'm not sure there is actual elasticity here, despite Uber's claims. This is simply anecdotal, as a New Yorker on the UWS, getting downtown took upwards of 2 hours (instead of the usual 20) and the traffic was filled with numerous black cars. The real problem here is not the cars on the street, but more the capacity of the city. Great report on this here: http://www.npr.org/blogs/money/2012/07/31/157477611/does-new...

Re: Uber Reverts Back to Surge Pricing in New York After One Day

#32

Post by pavel_lishin »

liber8 wrote: post #30
adamsmith wrote: post #10

In 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…

As I recall, authorities turned away anyone trying to make a quick buck by selling essential supplies.

Even with fixed prices, there was a limited number of goods. Driving a truck there to unload your wares still made economic sense, if you could do it at a large enough scale.

Re: Uber Reverts Back to Surge Pricing in New York After One Day

#33

Post by jonny_eh »

ynniv wrote: post #27
koenigdavidmj wrote: post #19

Seems 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.

We're talking $100 000 a day. That's quite a marketing budget!

Re: Uber Reverts Back to Surge Pricing in New York After One Day

#34

Post by tptacek »

001sky wrote: post #29
tptacek wrote: post #24

Earlier quoted context omitted.

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 polit…

There are lines miles long for gas. People do hoard in disasters. Gas in NY metro simply is more valuable now; for instance, as a substitute for the electric grid. Your reply is nonresponsive.

Re: Uber Reverts Back to Surge Pricing in New York After One Day

#35

Post by barrkel »

liber8 wrote: post #30
adamsmith wrote: post #10

In 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…

The correct response to a fixed supply of water is rationing, not either fixed or floating prices. Because without water you die, or catch diseases from poor substitutes.

With a fixed price, whoever comes in first gets the most water; laggards die. With a floating price, whoever has the most money gets the most water; poor people die. Neither of these is morally superior. IMO.

Re: Uber Reverts Back to Surge Pricing in New York After One Day

#36

Post by enoch_r »

adamsmith wrote: post #10

In 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…

I'd note that completely inelastic supply almost never occurs, even in a disaster. For example, if prices for water are high, it raises the likelihood that some entrepreneur will fill up a truck with water bottles and drive into a disaster zone to sell them. Or that a shopkeeper will stay open past his normal hours, or not set aside a bunch of water bottles for himself.

And of course there are dynamic effects of anti-gouging laws, too. Even if supply were unchangeable during a disaster, the knowledge that prices will--or will not--be allowed to rise when a disaster occurs change how shopkeepers will prepare when a storm is approaching.

Re: Uber Reverts Back to Surge Pricing in New York After One Day

#37

Post by ynniv »

jonny_eh wrote: post #33
ynniv wrote: post #27

Earlier quoted context omitted.

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.

We're talking $100 000 a day. That's quite a marketing budget!

No, substantive marketing campaigns are orders of magnitude more. And, it depends on how many new customers they get and how long drivers will cost extra. The just raised $50 mil, and the subways will be back in a week, two tops... do the math. It isn't every day you can buy happy new customers and good press, and on the days you can it usually costs more.

Re: Uber Reverts Back to Surge Pricing in New York After One Day

#38

Post by rayiner »

While we're on the subject... Isn't it amazing what kind of rapid and effective response you get when the people in trouble are among the richest in the country (NYC/NJ coast) versus the poorest in the country (New Orleans)?

I'm not complaining. I'm back in my Manhattan office two days after a truly epic disaster. I rode the train into work this morning, along the coast of Long Island Sound no less. It took ~10 minutes longer than usual, but on the whole the recovery is phenomenally impressive.

Re: Uber Reverts Back to Surge Pricing in New York After One Day

#39

Post by prentis »

001sky wrote: post #15
jbooth wrote: post #3

Here'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…

"jacking up prices has no benefit"

Jacking up prices gives distant suppliers an incentive to divert resources towards the disaster-struck area, reducing shortages.

Jacking up prices discourages people from buying goods that they don't really need, making them available to people who really do need them.

On the other hand, if prices are not allowed to increase, people have an incentive to hoard the scarce goods that they anticipate will become scarce. This of course creates those very shortages. And the hoarded goods go unused while the people who really need them are unable to buy anything.

Re: Uber Reverts Back to Surge Pricing in New York After One Day

#40

Post by jlgreco »

barrkel wrote: post #35
liber8 wrote: post #30

Earlier quoted context omitted.

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…

The correct response to a fixed supply of water is rationing, not either fixed or floating prices. Because without water you die, or catch diseases from poor substitutes. With a fixed price, whoever comes in first gets the most water; laggards die. With a floating price, whoever has the most money gets the most water; poor people die. Neither of these is morally superior. IMO.

I suspect water could be considered a special case, since it is so immediately necessary.

What if, instead, we were talking about bread? Assuming that rich people are fairly rare, then raising the price of bread high enough to be expensive but not so high that people cannot pull enough cash out of their pocket to pay for it, then the effect seems to me like it should be an approximation of a ration.

Clearly if Donald Trump gets to the store first and buys all the bread then nobody else would have any, but he could do that no matter the price. So long as the price is painful but feasible for anyone to afford, everything should work out more or less okay.

If the price is so high that nobody but Donald Trump can afford the bare minimum necessary, then there is certainly an issue, but I suspect raising prices that high would not be very effective.

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