I preface by saying, like everyone else, I was trained in econ as an undergrad and so I have no problem with surge pricing from a theoretical standpoint.
That being said: Uber set itself up for a (relatively minor) PR mess this New Year’s Eve, when surge pricing reached as high as 9.9x, and rides blew past $100 for ~15 minute rides in some cities.
Surge pricing in and of itself is not the problem, but there are three addressable issues at play, listed in order of severity (along with a suggested fix):
- Very minor: The app suffered from a technical glitch, by which some riders were charged a higher surge rate than they agreed to pay. Provided these claims are substantiated, it should be a pretty simple fix for Uber’s software engineers. From there, provide a full refund to riders affected, plus a credit for $50-$100 should be enough to buy back the loyalty.
- Moderate: Uber does a good job of ensuring that you know what you’re getting into with surge pricing, and they went the extra mile with a pre-NYE email this year. Still, I don’t think it’s quite enough. We need to be honest about two things: 1) That the availability of information does not equal the flow of information, and 2) That the problem is severely exacerbated by people getting drunk. It may cut into profits, but Uber should provide a fare estimate up front (without being asked for one) when the surge is over a given level (e.g., >2.5x).
- Severe: If the early anecdotal reports are true, it is a real problem for Uber that drivers were canceling rides and re-upping minutes later just to catch a higher surge price. The company is premised on reliable, high-quality service, but the incentives for their drivers on NYE were not in alignment with that premise. Happily, there’s a fairly elegant fix available – simply install some logic that says when the surge is >X (e.g., >2.5x again), and a driver cancels, that driver cannot pick up another passenger for Y minutes (e.g., 15 minutes). Uber would have to run some quick statistics on what would appropriately discourage the unintended, reputation-damaging driver behavior, without harming too badly the drivers who have to cancel for legitimate reasons, but finding that balance should be relatively trivial.
Overall, Uber acquitted itself well on NYE, and was clearly aware of some of the problems it would have going in – a few extra steps, however, and they’ll avoid the negative PR for the next big drinking holiday.