Chart of the Day: New York City Uber Effectiveness with and without Surge Pricing

Here’s an interesting chart from The Economist (sent in by Board Member Dana Demaster) that centers on the effectiveness of “surge pricing” as used by Uber in Manhattan.

Here you go:

The concept of surge pricing is something that comes up a lot in urban design discussions, especially around solving issues like parking, transit fares, and congestion. The key idea is that you make price dynamic to reflect demand, a basic economic principles.

Here’s the explanation from the article:

Surge (or dynamic) pricing relies on frequent price adjustments to match supply and demand. Such systems are sometimes used to set motorway tolls (which rise and fall with demand in an effort to keep traffic flowing), or to adjust the price of energy in electricity markets. A lower-tech version is common after natural disasters, when shopkeepers raise the price of necessities like bottled water and batteries as supplies run low. People understandably detest such practices. It offends the sensibilities of non-economists that the same journey should cost different amounts from one day or hour to the next—and more, invariably, when the need is most desperate.

The same principle would hold for things like parking meter charges in downtowns, or access to special lanes during rush hour (e.g. the little-used MNPass lanes). Or maybe something like charging more for your AirBnB room during the Super Bowl…

Questions emerge: Is surge pricing inherently unfair? If now, where else might this kind of system be put into place?

5 thoughts on “Chart of the Day: New York City Uber Effectiveness with and without Surge Pricing

  1. Karen

    If increased prices actually provably delivers more supply, then it is a good idea. If increased pricing is just rent seeking and taking advantage of desperate people or only having rich have access to basic needs, that does nothing for future supply – then no.

    I’m for dynamic pricing generally as a way to sort of “crowd” source the value of something, like say street parking, better manage public projects – if the rent collected on a public good is returned to the citizens.

    I think you’d have a lot less people complaining about congestion pricing or parking meters on city streets if they got a check in mail from the proceeds or even got “city credits” that could be used for such things or sold to others for real dollars if they don’t use it.

  2. Karen

    Uber’s surge pricing is a mess. They don’t share the price increases sufficiently with drivers so a lot of it appears to be rent seeking. They don’t contact drivers who are relaxing at home with alerts about rising demand but rather just jack up price offers to drivers already on road looking for fares. Their algos are so not transparent.

    If instead there was a shared open transparent market with bids for rides that all drivers could access whether they were ready to drive at that moment or now and the surge in prices were shared completely with driver – that would be more effective.

  3. Walker AngellWalker Angell

    Surge pricing appears to work quite well. It is not unusual for us check an app for a ride (Juno is becoming the much preferred ride choice instead of Uber in NYC), see higher surge pricing, and choose to take a train (or one of the new ferrys) instead. This frees that ride up for someone with a greater need and who is willing to pay the extra fare.

    A wheelage fee for trucks on busy streets can do much the same thing. A higher per pound/mile during the busy shopping day on Grand Ave and a much lower rate at 2a. A higher rate on Snelling Ave that has a lot of people walking, riding bicycles, shopping, and enjoying a sidewalk café lunch and lower rates on less impacting alternatives.

  4. John Charles Wilson

    I support this for most things, but I am against the rush hour tax on Metro Transit. My reasons are as follows:

    1. It started 1 June 1982 as a “temporary” measure to circumvent a law which no longer exists. 35 years later it still exists. Why?

    2. Other cities have tried a rush hour tax on transit: Denver, Portland, Sacramento. Most have repealed it. Only Seattle and the Twin Cities still have a rush hour tax on general transit that I know of. (Pittsburgh has a tax on *cash* fares on LRT during rush hour.)

    3. Transit users are often on the edge financially. It isn’t unusual for a rider to have literally spent the last money they have in their pockets on the fare. Or maybe they have just enough on them to make the return trip. An unplanned tax resulting from boarding at 3:01 instead of 2:59 could devastate such a person’s day.

    4. The rush hour tax and the old directional rules on transfers were the main two causes of fare disputes between drivers and customers. Making transfers omnidirectional was one of the best moves Metro ever made. Going to a same fare all day system would be even better.

    5. The proposed fare increase presents a perfect opportunity to even out the fares by simply raising the non-rush hour fare to equal the rush hour fare.

    6. I also propose making reduced fares all day as well, and introducing a 31-day pass for reduced fare categories.

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