The BuzzFeed news about Uber looked like this on New Year’s Eve, 2016:
With surge pricing close to 10x (normal price) in Miami, 4.9x in D.C.and 6.9x in Philadelphia, some riders were furious and horrified when they awakened the next day:
Where are we going? To Uber’s impact on markets.
Discussing the economic impact of Uber, scholars typically applaud the efficiency that the firm brings to “car-hire” markets. Called a transaction cost, the time and energy riders use to find and pay for a car has diminished. And because Uber figured out how to match huge demand fluctuations with variable supply, even after a concert or during a rain storm, cars are available.
You can see below how the number of drivers spiked when surge pricing kicked in after a March 2015 concert at NYC’s Madison Square Garden:
By contrast, because of a “crash” in Uber’s technology, surge pricing did not kick in for an hour or so during New Year’s 2015. As Uber explained, when price was at a normal level, extra driver-partners did not respond. The result? The number of completed ride requests plunged:
Our Bottom Line: Prices
In markets, prices convey information and incentives. With surge pricing, when the demand side is willing to pay more, we have an increase in the quantity supplied.
I only wish more people took economics. It infuriates me that Uber riders complain about a more efficient market that provides what they need and want.
Or I could just quote an excellent Chicago Law Review article that says Uber performs, “capitalist acts between consenting adults.”
My sources and more: The academic analysis of surge pricing was actually a good read as was the Chicago Law Review paper on Uber’s impact. From there, if you want to read more, the BuzzFeed comments were here and the Washington Post presented a good history of taxi medallion prices and urban logistics.