Uber spikes prices during Toronto downpour, then denies it

So now, friends, to today’s Startup 101 class. The subject is decency and the thesis is painfully simple:

Dont Be An Asshole.

This is truly not a deep philosophical argument about individual freedom, nor is it about what a company can legally do given their terms of licensure. It’s about doing the right thing.

Uber is the alternative to cabs that’s popping up in cities all over the place. I tried them for the first time last month when I was in San Francisco for WWDC – a city that’s notoriously hard to get a cab in that isn’t either driven by a complete fucking idiot who doesn’t know where he’s going, smells like shit, piss, puke or the ass of an incense merchant, or has a credit card machine that’s mysteriously not working that day.

I have to say, I was really impressed. The service is prompt, the app works great, the cars are clean and the drivers are polite.

But the first time they try to gouge me on price? My response would be, “Fuck you right in the neck.”



  • econ 101

    Supply and demand?

  • Sigivald

    Yeah, why should massively increased demand raise prices?

    Oh, wait.

    Because that’s the best way to do it, to make sure that the most demanding customers [those willing to pay the most] get service, and the ones who exhibit less desire to purchase the now-in-greater-demand resource [by being unwilling to pay more for it] stop consuming it.

    This is exactly what should happen during a demand spike or emergency, and exactly why, despite how popular and “fair”-sounding they are, “price gouging” laws are counterproductive.

    (The “right thing” might not be “keep prices the same and be swamped all night with a giant queue doing your rationing, instead of price”.

    Because there is going to be rationing of taxi rides in that context – the only question is whether it’ll be “I didn’t ride because it was too expensive” vs. “I didn’t ride because the next available cab was at 4 AM”.

    I far prefer the former, because that way the dudes that really need a ride can choose to pay more to get one. In the latter, well… tough.)

    • http://mangochut.net/ mangochutney

      I don’t disagree that increased demand can/should result in raised prices. I don’t begrudge companies for making money.

      But: price-gouging during an emergency is plain wrong. It flies in the face of the most basic rules of Corporate Social Responsibility and human decency.

      It fosters situations in which not the person who needs a service (in this case a means of transportation) the most is given it, but the person with the most money.

      Companies like this, show that they don’t care for the community they operate in and show that they don’t value the customer beyond a one-time transaction.

      • Tom Winzig

        If you don’t have increased pricing for increased demand, then you have to go to rationing, otherwise hoarding occurs, which is akin to price-gouging on the demand-side. Since rationing taxis doesn’t make sense, perhaps in natural “disasters,” they should instead keep prices at a lower rate, but limit rides to those that need to travel greater distances. Otherwise, at normal rates, they’d likely be swamped by people that could otherwise walk to their destination. (If prices were allowed to surge, it’s likely that people needing to travel unwalkable distances would instead pay the price.)

        • http://mangochut.net/ mangochutney

          Trying to make sure the ‘right‘ people get the taxis is the job of the company in a situation like this. The other company mentioned in the article seemed to have done exactly this.

        • Meaux

          But how do you know who really needs itmost ? Maybe someone would like to go home and would at the low original, but when they see the surge price, they decide to just lay low at a nearby friend’s house for a few hours. OTOH, someone who really does need to go home to be with their kids would be willing to pay more and would not want to go to Plan B. The first person may have further to travel to get to their first choice, but the second person would still likely need it more. A one day, one time price is a good way to sort these situations out.

      • Sigivald

        Saying “it’s plain wrong” doesn’t address ANY of the points I made about why it’s exactly the opposite, by preventing runs on supply.

        You don’t like it, I know.

        That doesn’t mean it’s wrong.

        And since a taxi service has no possible way, ever to determine who “most needs” a service, money is the best proxy.

        It sure as hell beats “whoever calls first”, which is equally not “who most needs” the service.

        Money is the surest proxy for desire to acquire a commercial service.

    • Moeskido

      What a predatory, classist point of view, especially about a service that has nothing to do with the kind of supply chain that relies upon physical goods.

      The only legitimate reason Uber would have had for raising prices for its service was increased operating costs, passed along to the consumer.

    • Speranza89

      You’ve made a point about allocating the scarce resources more efficiently, and it’s a reasonable point to make. I’m not sure the best expectation for taxi allocation is based upon willingness/ability to pay – this is one of the reasons why taxi service is so strongly regulated in many cities – It’s a basic service that people rely upon. Income effects can really skew who gets a taxi in that type of situation.

      However, the more important point is that Uber claims to institute surge pricing to increase supply. The idea is that by allowing the price to rise Uber gets more drivers willing to drive for Uber during a time when there is a shortage of cars. Theoretically, more people start driving Uber cars because they get more utility from the larger amount of money than from whatever else they might do during that time (but they have demonstrated that at normal rates they prefer to do something else during that time).

      The real question for Uber is whether raising the price during a disaster (or other unplanned surge of demand) actually increases the number of drivers in a short enough amount of time to make a difference. This depends on the price elasticity of supply (do drivers respond to increases in price of this size by deciding to go to work?) and also on the time delay between price going up and drivers being able to pick up Uber customers.

      I, for one, would like to see Uber’s data on prices and number of cars on the road over the period of the storm. If the stock of drivers on the streets really increases in response to an increase in price, it would seem Uber is doing the right thing. If, on the other hand, the stock of cars doesn’t increase, or increases after a long time interval, the surge pricing in response to an emergency really is price gouging.

      I agree with Peter below that trying to pretend they didn’t use surge pricing is “unbelievably … stupid,” but it is unclear whether or not raising prices in response to increased demand from an emergency is the wrong thing to do.

      One suggestion for Uber – if drivers actually respond to price during an emergency, the first thing you should do is stop taking any percentage of the fare. This increases the amount of money the driver makes (and thus increases the number of drivers, improving reliability) without increasing the cost to the consumer. Surely the revenue lost will more than be made up for in the future by the good pr.

      • Sigivald

        I agree, to clarify, the pretending NOT to have increased prices when they did, is insanely stupid.

        Do it, because the underlying economics is completely sound and good for the taxi-using market.

        But own it, don’t pretend you didn’t do it. Defend it. The economists are in roughly 99.9% agreement that it’s the right thing to do to best serve consumer demand.

        Don’t chicken out and just pretend otherwise.

  • Peter Cohen

    I’ll tell you what galls me the most about this article, and the reason I linked to it: Because Uber did this then tried to pretend they didn’t. That was just unbelievably fucking stupid.

    • Meaux

      Your final comment, “But the first time they try to gouge me on price? My response would be, ‘Fuck you right in the neck,’” is about the surge pricing, not the denial. The only place you mention the denial is in the title.

      • Peter Cohen

        Doesn’t change anything. I’m not going to put up with price gouging, and I have no tolerance for shitty social media management.

    • http://tewha.net/ Steven Fisher

      I agree with you; pretending they didn’t do it was stupid.

      But raising the prices? Doesn’t that mean the drivers get paid more? If so, that means the drivers are more motivated to get out there. Seems a pretty good response to a bad driving situation. Otherwise, the drivers are going to stay home.

  • Jessica Darko

    Jim-

    I recently made you aware that one of your sponsors is scamming app developers. I posted an email from them proving it. As a result of this polite comment, you have blocked my primary ID from posting comments here and deleted them.

    This means you are working to support the scammers and censoring anyone who points out that your sponsor (appsfire) is a scammer.

    This will not stand. Next time I see you, whether it be the next WWDC or some other conference, you are going to be put in a world of pain.

    I think a good strong kick to the balls is appropriate. Then when you go down, a second one. but if that’s not possible, expect a beer bottle across the back of your neck.

    Yeah, I’m a girl, I’m smaller, and you’re a big fat asshole, so I can’t fight fair.

    You won’t see it coming…. but I’m telling you now so that when it happens, and you’re on the ground and I’m long gone, you’ll know exactly what you did to earn it.

    It’s my way of saying “Fuck you right in the neck” to you.

    • http://mangochut.net/ mangochutney

      So, let me get this straight:

      You write a comment below the sponsor post on Jim’s and Peter’s site, explaining how one of the sponsors is scamming developers.

      After you don’t the reaction you had hoped for—I presume you wanted Jim to drop them as a sponsor or run with your story—you start spamming The Loop, posting the same comment under different stories that have nothing to do with AppsFire.

      These OT comments show a blatant lack of respect for both the proprietors of the site and its readers and you get into arguments with commenters for not supporting your view and believing your statements.

      You’re banned from commenting, so you open a new account threatening to bodily harm Jim over the internet.

      Dear Jessica Darko (@JessiDarko),

      (student at the University of Austin, former student of the Louisiana School for Math, Science, and the Arts, declared resident of Seattle)

      you’ve just committed a criminal offence punishable under state and federal law.

      If you don’t get the reaction you want, people don’t agree with you, or just don’t care about what you have to say, don’t spam people, just leave. Maybe your pals at TechCrunch are more susceptible to what you have to say.

    • mdelvecchio

      “Next time I see you [...] you are going to be put in a world of pain.”

      hmm do you think maybe the reason you were booted is your mental disease, manifesting in threats to other users? i know thats one reason i flagged your posts (when you threatened to hurt me and others who had differing opinions than your own).

      maybe?

    • Peter Cohen

      I’d like to see you try. Jim responds well to physical threats.

  • Neal Pozner

    I know it’s the thing to get upset and frothy on the internet over any perceived slight, but I must ask if they really gouged, or is their surge pricing algorithmically controlled? Whenever I’ve tried to use the service at high-demand times (Friday/Saturday night at midnight) I’m told up front that the cost will be higher.

  • Paul Sprangers

    I used Uber in New York in April and while chatting with the driver he just told us that Uber has multiple rates for different situations. I believe they have a normal rate, late-night rate, rain-rate and one or two others.

    Weird that the company denies this, but that every regular Uber user notices this and that the drivers don’t mind telling you either.

  • GFYantiapplezealots

    I don’t get the outrage on this (other then they denied it). Isn’t this how eBay works? Why no outrage about eBay?

    • http://www.tumblr.com/blog/his-divine-shadow His Shadow

      eBay’s prices are set by eBay in response to demand during a crisis for the purpose of gouging?