In chapter 17 we discuss dynamic pricing — when prices change “according to the level of demand, the type of customer, or the state of the weather.” Uber is a company that connects people who need a ride with drivers who can give those rides (a competitor to the taxi cab).
A key part of Uber’s business model is “surge pricing.” Surge pricing is a form of dynamic pricing and prices increase as cabs become more scarce (due to fewer drivers or a significant increase in demand). So for example, when the weather is particularly cold or wet, many pedestrians seek out cabs. Surge pricing gives drivers more pay to encourage them to keep working at these times. Surge pricing is controversial — and some customers don’t like that prices change based on supply and demand.
A new Uber rival, Gett, does not use surge pricing and touts this point in an ad campaign — see more at “Gett Ad Campaign Takes Jab at Uber for Surge Pricing” (HybridCars.com, June 21, 2016).
Some consumers don’t like surge pricing and wonder if this is fair. In some countries, laws have been enacted to prevent this practice. Is it ethical for Uber to charge higher prices? Do you think Gett has a good strategy to counter Uber? Explain. How could it effect Gett’s driver availability and reliability? Will it have drivers when customers need them?