![]() Yes, though it can skirt the boundaries of legality under extreme circumstances. The highest multiple ever recorded was 50 times the regular fare, or $57 per minute, due to an apparent glitch in Uber’s fares in Stockholm, Sweden, Business Insider reports. In non-emergency situations, surge pricing of six to eight times the regular fare have cropped up in moments of extreme shortages. Uber has also vowed to donate its 20% commission on rides during emergencies to the American Red Cross. When disaster strikes, Uber caps fares at a price that matches the area’s fourth highest price over the preceding two months. Uber recently announced an algorithm change that sets maximum surge pricing levels during states of emergency in the U.S. Is there a limit to Uber’s surge pricing? “By offering more money to drivers, they were able to increase on-the-road supply of drivers by 70-80%, and more importantly eliminate two-thirds of the unfulfilled requests.” Economists call this responsiveness to price “elasticity.” Uber’s service does appear to be unusually elastic, given that its fleet of drivers expands and contracts in real time. “In just two weeks they had a resounding answer,” Gurley writes. Uber’s Boston team first tinkered with a price hike on weekend nights around 1 a.m., when drivers tended to clock out just as the city’s public transit system approached closing time, a situation that created lots of demand for Uber cars. According to a blog post by Uber board member Bill Gurley, the program has been a success since its inception in early 2012. The basic principles of economics would dictate it does - as would Uber’s experience. We would bring cities down to 3x, only to see conversion go up, supply go down, cars get saturated, and “zeroes” popping everywhere.” Zeroes are Uber’s term for riders who open the app and see no available cars in their area.ĭoes “surge pricing” get more drivers on the road? “At some point the east coast cities started breaking 6x multipliers-we accepted defeat at that point-the unbending demand breaking our will. “To our dismay,” he wrote, “the pricing multiplier kept going up.” ![]() After the great Uber Fare Hike of New Year’s Eve in 2012, for instance, Kalanick described the scene at Uber Mission Control. Those higher prices are supposed to make drivers more likely to bite, putting more Uber cars on the road when they’re most needed.ĭemand surges have also been monitored by Uber’s human staffers, who have on rare occasions used their discretion to lower prices. ![]() Uber’s pricing algorithm automatically detects situations of high demand and low supply and hikes the price in increments, depending on the scale of the shortage. Two years later, questions about surge pricing still linger - such as: ![]() “Seven decades of fixed pricing in car transportation is a lot to unwind in a night,” wrote Uber CEO Travis Kalanick in 2012. That supply-and-demand surge pricing argument has become a common refrain for the company, which has occasionally bumped up against public resistance to its shifting fares. ![]()
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