The Surge – Not a 1990’s Soft Drink

Image courtesy of ReadUnwritten.com

Surge pricing is familiar to nearly everyone involved in the ridesharing industry. It may also be a familiar term to those who work for either brick-and-mortar taxi services, or service industries like hotels and theaters. The concept of surge pricing is not a new thing, and the theoretical concept isn’t necessarily a bad thing. As the saying goes, execution never goes according to plan. In the case of major rideshare companies like Uber and Lyft, it is unknown if the execution of surge prices went awry, or went directly according to their plan.

For those less knowledgeable, surge pricing was a concept developed early on in the service industry, providing higher costs or payouts in certain regions, offsetting the volume of customers in that area. For taxi services and rideshare services, the surge price process was meant to provide a higher incentive for drivers to pick up riders in the region. It is a simple equation backed by the economic concept of supply and demand. As supply increases, costs decrease- as supply decreases, costs increase. In the case of ridesharing and TNCs, the supply is the driver- a service which the consumer pays for. While this would make sense from a marketing standpoint, it does not make much sense for the driver. Especially given the issue where drivers are not always receiving the increased fare. Uber’s own description of the surge pricing presents a complicated and not necessarily fair system for granting drivers their increased share.

It is equally unfair for the passengers, as they are given the choice between paying more- likely to the company, not their driver- or just not accepting a ride at all. When Uber and Lyft, companies that both utilize surge pricing, are market dominators- the customer is left with little choice except to pay an increased price. Sometimes this price is drastically higher, and according to an interview done by ABC News, drivers are expected to be making $800 to $1000 less per month due to the surge pricing.

Surge pricing, while on paper, makes sense economically- it is increasingly obvious that the major ridesharing services tend to use surges to produce more income, while providing drivers with a false sense of increased profit. In some cases, the cost of an Uber can jump from a mere $12 for a reasonable trip, to $47 for the same trip a few hours later. The driver’s share of this cost however, is not multiplied by nearly four. The system is seen as little more than a money grab, and to even the layman, it is. Basic economics supports the idea of surge pricing, yet- such a system only makes sense if the drivers truly are being given a stimulus to operate in the surged region. Instead, they are given a false sense of increased income- on paper, it comes out to far less. While the customers do have a ‘greater access’ to drivers, the absurd cost does not make it reasonable. At times the surge pricing may increase up to eight or nine times the original cost of the fare. The driver however, does not see eight or nine times an increase in per-ride profit.

Because of this, RideSpider perceives Uber and Lyft’s method of surge pricing as being economically immoral, both to the rider (customer) and driver (employee). As such, we promise to never subject our drivers or our riders to unannounced fluctuations in pricing. What a rider pays mid-afternoon on a Tuesday is what they’ll pay on late-evening on a Friday.

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