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DU Home » Latest Threads » Forums & Groups » Main » General Discussion (Forum) » Uber Charged $100 Minimum... » Reply #14

Response to CincyDem (Reply #1)

Mon Dec 15, 2014, 12:33 PM

14. Yep. It's an automated computer algorithm.

The higher the number of requests, the higher the prices go.

It's not just about getting inactive drivers to opt in or out either. Let's say that you have an Uber driver density of 5 per square mile in an urban area. Demand in one particular area peaks, causing cars to become unavailable. The higher prices then help to lure in drivers from neighboring square miles to supplement the "local" drivers. Because those other drivers are coming in from further away, their operational costs are higher, meaning that they need to collect more money just to make the same level of profit as they collected from their local fares. The higher the rate, the more drivers they pull in from neighboring areas. The more drivers they pull in, the faster the backlog clears. The faster the backlog clears, the faster rates drop back to their normal levels.

The problem with the algorithm is that it doesn't comprehend emergency situations like this one, and responds to them like any other demand spike. On the other hand, algo wonks would point out that the spike in Uber fares probably pulled in a substantially higher number of drivers, allowing more people to evacuate than would have been possible if Uber used flat-rate pricing.

I have a lot of problems with Uber, but this isn't really one of them. Elastic pricing vs. flat pricing is more of a personal preference thing than a "liberal/conservative" issue IMHO.

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