A behavioural economic critique of Uber’s surge pricing

From Misbehaving, by Richard Thaler, pg 136:

Uber has defended surge pricing on the basis that a higher price will act as an incentive for more drivers to work during peak periods. It is hard to evaluate this argument without seeing internal data on the supply response by drivers, but on the face of it the argument does not seem to be compelling. First of all, you can’t just decide on the spur of the moment to become an Uber driver, and even existing drivers who are either at home relaxing or at work on another job have limited ability to jump in their cars and drive when a temporary surge is announced. One indication of the limits on the extent to which the supply of drivers can respond quickly is the very fact that we have seen multiples as high as ten. If thousands of drivers were ready to leap into their cars when a surge is announced, large surges in price would be fleeting.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s