The hike in the rates of Uber and other cabs as well, at the time of holiday season or large scale emergencies is something which has time and again irked customers. People often deem such practices unethical and greedy on the part of cab companies.
However according to a research commissioned by Uber with the help of Chris Nosko, an economics professor at University of Chicago, Uber has attempted to justify surge pricing terming it as a crucial component to achieve its fundamental goal of stellar customer service and satisfaction.
The study took into account the 26 minutes glitch in surge pricing technology of Uber caused during the New year’s eve and other times where it was working properly. It was found in the study when surge pricing did not kick in place on time on New Year’s eve, the company saw at most 25% successful rides of the total rides causing a lot of dissatisfaction among customers. Uber explains this with the help of basic supply-demand dynamics of economics.
It said that at the time of rush and weekends when demand is high and surge pricing comes in, many people chose to wait for some time till the prices come down and thereby only people who were in emergency chose to ride and drivers were automatically led to those places leading to gradual reduction in demand. This scenario ensures that 100% of ride requests were completed despite increase in ride requests without affecting the ETAs.
However when surge pricing could not be implemented due to a glitch, the company saw sharp increase in ride requests of which only 25% could be completed. Not only did the ETAs increase during this period but also the drivers showed a less interest in completing ride requests without surge pricing.
So surge pricing, as per Uber, allowed the company to achieve its foremost goal, i.e, “to ensure you can push a button and get a ride within minutes — even on the busiest nights of the year.”