Markets and Clearing Prices
Last saturday night in NYC was a bit of a moment for Uber and their surge pricing mechanic. Most people were seeing 3x-5x in manhattan for most of the night and there were reports of 10x for some people.
There was a snowstorm, people were out at holiday parties, and there was more demand for rides than there were cabs. So in some sense the market worked and rides went to those who were willing to pay the most for them.
The next day Mo Koyman tweeted about it and one of the larger twitter conversations I have seen developed.
.@uber is loved by customers, but charging 4x – 8x in inclement weather is unacceptable. is that one day's margin > customer experience?!?
— Mo Koyfman (@mokoyfman) December 15, 2013
Today my partner Albert wrote a post about it and noted a couple issues with the way surge pricing works and the way the urban transportation market works. He also points out that the best way to get around NYC is the subway, which is how I got home from a holiday party last night around 10:30pm. I love the subway a lot more than I love any other form of transportation in NYC.
However, this is an interesting discussion because it points out that as markets/networks (Uber) replace hierarchies/bureaucracies (the TLC), we are running into issues that are going to have to work themselves out over time. As Albert points out in his post, the current yellow cab fare model is even more flawed than Uber's surge pricing model. Ideally we will see more supply emerge and a real marketplace structure develop in urban ride sharing. Then we may get reasonably priced rides on a wintery and festive night in NYC.
And then, of course, there is always the subway.