Uber's surge pricing

STREETLIFE - Nigel Paul C. Villarete - The Freeman

Other than the fact that the Uber "mobile-app-based transport service" actually uses privately-owned cars, and not Philippine government-registered ones for public use, the fare rate pricing mechanism is also the other main difference between Uber and other government-franchised taxi companies. This is also the other main bone of contention, other than regulatory conditions for safety.  Taxi fares are regulated by government - any deviation thereof constitutes a violation with a corresponding penalty.  Uber prices its own.

Being deregulated and primarily dependent on market forces may have its advantages, and in a competitive market, this can benefit the consumer.  You have a service that is at your beck and call, with a choice of vehicle, and door-to-door service, at a price which might even be lower than the regular taxi.  For the kind of service rendered, and especially when getting a regular taxi might be difficult, paying for a higher fare might even be acceptable. This is the main reason why majority of the comments were positive ("It's very convenient!).

But the oft-debated issue, especially in cities that have had Uber for some time, is that of surge pricing. Uber has certain parametric rates which they apply - automatically through their system, but in certain cases when taxi services become rare, the system introduces surge pricing, which is a factor of the base fare.  For example, the app might tell you the surge factor is 1.3x or 1.5x, which means the fare (at that instant) is 30 or 50 times the base fare.  You take it or leave it, that's how it works, because you can decline anyway.

But there were times this may go as high up as 6x, or 6 times the base fare.  Or in very rare cases, it will shoot up ridiculously through the roof, igniting public outrage as what happened in many cities around the world. Uber has tried to downplay the publicity nightmare by explaining its pricing algorithm but continues to maintain that it is on the whole beneficial to everybody.  This would be something that Philippine regulatory agencies have to study deeper if the government eventually allows Uber to operate legally here.

The principle is simple - invite more Uber units (drivers) in times when taxis are rare.  Whether we like it or not, there will always be times when the number of running taxis dwindle - during holidays, for example, or midnight, or occasions when even drivers prefer to be with their families, or simply refuse to go to a particular area or zone.  By increasing the fare, more Uber drivers would be tempted to offer services.  Wouldn't you, if the price is 6 times the normal?  It's still law of supply and demand, both for the passenger and the Uber driver.  There will always be passengers who are willing to pay the price, and there will always be drivers willing to sacrifice if the price is right.  But it definitely invites a public outcry.

Again, it becomes a highly personal and individualistic issue.  Many people will not mind the surge for as long as they get the right service at the particular time, especially those who can afford it.  But how about those who can't? And since they have the flexibility of pricing, Uber operators/drivers can be choosy on when to operate, and will be able to offer lower fares than ordinary taxis at certain times, placing the latter at a great disadvantage since they have to stick to the regulated rates.  Again it seems there are certain classes of citizens who may be at the losing end if we introduce this service here - something that government really has to consider in crafting the regulatory guidelines.



vuukle comment








  • Latest
Are you sure you want to log out?

Philstar.com is one of the most vibrant, opinionated, discerning communities of readers on cyberspace. With your meaningful insights, help shape the stories that can shape the country. Sign up now!

Get Updated:

Signup for the News Round now

or sign in with