Uber surge pricing: “Sugar coated poison”?

A quite sensationalist headline on stuff this morning…Uber app ‘sugar-coated poison’ – cabbies“. The head of the Taxi Federation is telling us that Uber is evil. Now Uber is a big threat to the traditional taxi business model so take these comments with a grain of salt. Particularly the fact that:

The app is currently illegal in New Zealand

Just because the law hasn’t kept up with technological innovation doesn’t make Uber a bad thing. Now the real fear mongering comes when he talks about Uber’s “surge pricing”

The metering system isn’t authorised and they don’t want to change it because they want to be able to bring in surge pricing. For those people who complain about the cost of taxi fares, you ain’t seen nothing yet.

It’s our job to educate the drivers and the public that this is sugar-coated poison.

What is surge pricing? I’ll let Uber themselves explain it:

Without a surge pricing mechanism, there is no way to clear the market. Fixed or capped pricing, and you have the taxi problem on NYE—no taxis available with people waiting hours to get a ride or left to stagger home through the streets on a long night out. By *raising* the price you *increase* the number of cars on the road and maximize the number of safe convenient rides. Nobody is required to take an Uber, but having a reliable option is what we’re shooting for

So yes, surge pricing means Uber is really expensive when there is a large demand for car rides. You might pay more $ than you would for normal taxi at the same time, but this ignores the non financial cost you might incur waiting for a normal taxi. So we incur the opportunity cost today when we are trying to find a cab on Saturday night. Surge pricing gives you the option to pay a premium to avoid that. In total it may not be more “expensive” depending on how you value your time. Is that a bad thing? You still have the option of catching a normal cab….I can think of a few nights where surge pricing would have come in mighty handy.

Update: by pure coincidence Jesse Mulligan just tweeted the following from LA…turns out Uber can be cheaper than taxis too, no wonder the taxi industry is scared!