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Originally Posted by Bh.P I would take what these apps companies say with a pinch of salt. Would they be willing to publish their algorithm? I have a feeling that their surge pricing runs on an extortion algorithm, rather than demand/supply algorithm. Why else would it introduce surge pricing when it begins to rain during an off peak hour? |
Well it's our word vs theirs, and given that they are providing the service we have to take their word for it. No-one will publish their algorithm, this is their intellectual property and quite frankly, if you are unhappy with how it works, use an alternative service. Take a normal metered taxi!
Personally, I have not experienced surge pricing during light rainfall etc here in Mumbai, but arguably I do not use the service daily. I don't believe off-peak / peak hours are relevant during rain, as you would have a lot more people who would generally walk / take a bus / take an auto be looking for an Uber, given the doorstep service it provides. So essentially, demand DOES go up. Besides, Uber has been very good (or has later refunded fares) about not implementing surge pricing during actual emergencies - there have been various examples in the US, Canada, Europe where during natural disasters like flooding, unprecedented snow-fall, terrorist attacks (Paris), the company has turned off their surge pricing algorithm.
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Also, if we are arguing that surge pricing is acceptable based on the premise of demand/supply market forces, then what are they doing to bridge the gap over a period of time? Are they trying to enroll more cabs/expand their base to do business on volumes, rather than continuing to extort customers? In most demand/supply based market commodities, it is a practice to try and bridge the gap so the price corrects itself over a period of time. But here I have seen the price continually increase since the time these guys came to market.
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I think the problem here is that we expect Uber to be doing social service to the country. Let's be clear, it is the responsibility of the government in power to ensure good quality public transport which is easily accessible and fairly priced (BUT this does not mean that when a private operator is offering a good quality alternative to the lack of public transport, the government should enforce stupid restrictions and licensing to make up for their own short-comings and lack of planning). Unfortunately, we do not have this in India, and are dependent on private operators like Uber / Ola which are bridging the gap.
Uber is a private company, and all private companies have only ONE objective, to turn a profit and create value for shareholders. As a service, they are taking advantage of gaps in public transport by offering a super-convenient, fairly priced (at most times) taxi option to users who can afford this.
Surge pricing is something they developed to ensure that they do not have a multitude of users opening the app and seeing no cabs available (because if this happens often enough, users will not return to the app). The only way to make sure cabs are always available, is to implement a natural supply/demand force, and logically how this should work is:
Demand increases in a certain area (due to any reason - rain / peak hours) beyond the available cars > the surge pricing algorithm comes into play > this encourages more Uber/Ola drivers to venture to this area of high demand due to opportunity of higher fares, ie supply increases > equilibrium is reached and surge pricing reverts to regular pricing.
This is exactly how air fares / hotel tariffs / car rental prices etc work. Even the Indian Railways has implemented dynamic pricing! They had dynamic pricing during the April - June & December holiday period! Why are we ok with this, but not a similar model for cab fares?
I also disagree on prices having increased over time, atleast in Mumbai, where we have pretty good public transport (compared to the rest of the country) and auto-rickshaws / taxis are fairly easy to get, prices have fallen with UberGo & Ola Micro. An UberGo is more reasonably priced that a normal black-and-yellow cab, and offers the additional comfort of air-conditioning (which is definitely worth it in humid Mumbai) as well as arriving at my door to pick me up. The cars we get are also much better maintained and driven than the sad Santros / Premier Padmini's and Maruti Van taxi's.
Also, just based on my conversation with various Uber drivers and friends, the number of drivers enrolling to drive for Uber is growing exponentially, almost every Uber driver I get has been driving for less than 3 months, and/or is buying another vehicle to enrol as an Uber for the extra money he can earn. It is only in Uber's interest for the number of vehicles to increase as they earn a flat commission per ride so more volumes is how they will increase their revenues.
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Plus, it looks like these guys want to make a quick buck with no accountability what so ever. If you are charging a premium, you need to have good reasons. Just offering convenience of booking does not warrant a huge premium they in my view.
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So Uber's USPs are - convenience of the cab coming to you instead of you going to the cab, a well-maintained car with air conditioning, and cashless transactions (which is now diluted given that they have activated cash payment option). Even if you assume that they are charging a 'premium' (which is only really a premium during surge pricing), they are not forcing you to pay it.
This is how supply-demand works, if you feel they are price-gouging or overcharging, go with the next best option. If there is no other option, it is the government to be blamed - we pay them taxes to provide us services, which they are not providing us. Why do we expect no accountability from them?