Is There Anything Wrong With Surge Pricing?

There has been a lot of chatter about how Uber’s surge pricing is really just disguised price gouging and that they should be ashamed of the mechanic. The backlash appears to have first begun after NYE 2011, and it lead to Uber posting this detailed explanation of surge pricing and forced CEO Travis K to publicly defend his company. The chief complaint, besides the high prices, was that Uber was not being transparent enough with surge pricing… it was not until after the rides were complete that customers realized what they had been charged. To address those complaints, Uber has since implemented a two-step authorization of sorts for surge pricing, whereby you have to enter the surge level into the screen and accept the higher rates. Additionally, on days where surge pricing is expected the app will display a pop-up upon loading warning users. Despite these UI change and pre-NYE surge pricing warnings (2010, 20112012, 2013) New Years Day anger and regret on social media from regretful riders has become an annual tradition.

Recently, a freak snowstorm in NYC led to yet another outcry against Uber, with many claiming that their surge prices in a weather emergency situation is an example of the worst kind of capitalism. Uber responded in the way it always does, defending surge pricing as a way to guarantee a ride is always available and as means to get drivers on the road; that it’s merely a supply and demand mechanic and by raising prices they can quickly boost supply side. Uber has released internal data which supports that claim, but there are still questions whether or not increasing prices 9x is really fair. I think the criticism of surge pricing is more fair in instances like the freak snow storm than during something like NYE, because at least with the former you should know better than to expect normal rates and you have the ability to plan other means of transportation in advance. Either way, I think consumers are being overly entitled to think they shouldn’t expect to pay a premium for a service that has supply constraints in a situation where demand will obviously be high.
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