How does Uber's surge pricing model which charges more for rides when there is a lot of demand actually increase economic benefit?


How does Uber's surge pricing model which charges more for rides when there is a lot of demand actually increase economic benefit? The goal of surge pricing is to find the “equilibrium price” at which driver supply matches rider demand and riders' wait time is minimized. Studies show that surge pricing achieves what it was designed to do: it brings more drivers online, and it allocates available rides to those who value them more.


Why does Uber have so many expenses?

Key Driver 1: Cost of Revenue Cost of revenues are the biggest driver of Uber's expenses, accounting for a little over 40% of total OpEx. This includes Core Platform insurance expenses, credit card processing fees, data center expenses, mobile device and service expenses.


Why are some Uber rides more expensive?

We all know that ride-share companies like Uber and Lyft operate dynamic, or “surge”, pricing: they change their prices in real time, according to supply and demand.


Is demand for Uber rides elastic or inelastic?

Uber's supply and demand curves are highly elastic; drivers on the supply side are people with alternative funding sources and preferences, meaning they work when they want to (and even sometimes for the competition).


Is Uber surge pricing an example of high tech gouging?

According to Kalanick, yes. But there is no way for customers to gauge supply and demand for themselves beyond looking at the dynamic-pricing multiple. And dynamic pricing is still not the same thing as true market pricing — like an auction system in which riders and drivers bid for one another's services.


What is the biggest scandal about Uber?

At the time, Uber was not just one of the world's fastest-growing companies - it was one of the most controversial, dogged by court cases, allegations of sexual harassment, and data breach scandals. Eventually shareholders had enough, and Travis Kalanick was forced out in 2017.


What is the surge pricing strategy for Uber?

Surge pricing automatically goes into effect when there are more riders in a given area than available drivers. This encourages more drivers to serve the busy area over time and shifts rider demand, to maintain reliability and restore balance.


What is the Uber pricing controversy?

Khosrowshahi attributed surge pricing to inflation and increased costs of labour, but Forbes' report contradicted this, revealing that Uber's prices in the US had risen at four times the rate of inflation from 2018 to 2022.