Just before noon today, Uber, the San Francisco-based request-a-ride app decided to temporarily turn off what the company calls “surge pricing,” but only for riders. “We turned off surge for consumers, but to get drivers out we’re paying them the surge price,” Uber CEO Travis Kalanick told Betabeat by email, offering the example of paying drivers double, but charging customers the normal price.
“This way,” he said, “We can maximize the number of drivers on the road.” Turning off the surge pricing will result in “huge losses for the business,” he noted. But Uber will “do it as long as we can today while we figure out more sustainable ways to keep supply up while the city is in need.”
In response to complaints about prices doubling today, when many commuters are left stranded by Sandy, Uber’s NYC community manager Ed Casabian had defended the company’s position, noting that rising prices help increase supply:
@frankdenbow Higher prices means more drivers will come out and work. We’ve seen nearly a 50% increase in supply this morning.
— Uber New York (@Uber_NYC) October 31, 2012
Although Uber’s since-shuttered beta service for yellow cabs in New York only cost riders a 20 percent tip (shared with drivers), Uber’s black car and slightly cheaper hybrid car options come at a considerable premium. And this morning, the additional surge charge left local users frustrated:
Remember the good old days when “demand pricing” after a supply/demand shock like a hurricane was called price gouging? cc/ @uber
— Jeremy Fisher (@jeremyhfisher) October 31, 2012
However, the press-friendly about-face has its critics too:
Good of Uber to operate surge pricing in NY today, defend it on economics grounds and only finally to back down once everyone was furious
— Paul Carr (@paulcarr) October 31, 2012
Slate’s Matthew Yglesias mounted a nuanced defense of so-called “price-gouging” in Slate yesterday.
“Stopping price hikes during disasters may sound like a way to help people, but all it does is exacerbate shortages and complicate preparedness.
The basic imperative to allocate goods efficiently doesn’t vanish in a storm or other crisis. If anything, it becomes more important. And price controls in an emergency have the same results as they do any other time: They lead to shortages and overconsumption. Letting merchants raise prices if they think customers will be willing to pay more isn’t a concession to greed. Rather, it creates much-needed incentives for people to think harder about what they really need and appropriately rewards vendors who manage their inventories well.”
And that’s how your free market capitalism gets made, ladies and libertarians.
UPDATE 10/31 1.30 p.m.: Betabeat just spoke to Uber general manager Josh Mohrer by phone. He noted that Uber only had surge pricing for riders turned on for less than one hour today–squeaky wheels, everybody!–before he and Mr. Kalanick decided to drop it. “Most of our drivers live outside of Manhattan, so it was difficult for them to get in yesterday,” which is why surge pricing seemed like a good option, Mr. Mohrer said. “But this is really an extraordinary circumstance.”
Drivers are currently making double and demand is pretty high with most subways and mass transit options out, he said. As for when and if surge pricing would be turned back on for riders, Mr. Mohrer wasn’t sure. “Obviously this is a real time situation.”