economist One article that discusses the ride-sharing industry points out that ride-sharing companies inflate prices when demand for their services is high.
this Digital TwinThe digital twin is one of the most sophisticated systems of its kind, allowing Uber to adjust its operations in real time. Frustrated riders might think this will enable the company to use “surge pricing,” where fares spike to balance demand for rides with driver supply. That’s partly true. But a more direct and more positive effect is that the digital twin enables up-to-the-minute route optimization amid the ever-changing nature of urban traffic.
(Price gouging is generally defined as a situation in which a company sets prices higher than normal levels to prevent shortages.)
The taxi industry is a good example that demonstrates the theory that consumers don’t like price gouging. Prior to the advent of ride-sharing, the taxi industry in New York City was regulated by the government and set standard prices. As a result, cabs were very hard to find during peak hours when demand outstripped supply at regulated prices.
Ride-sharing companies have decided to implement surge pricing during periods of high demand to prevent shortages. as you can seethey grew to dominate the New York City taxi market.
It’s no surprise that polls show that most Americans oppose price gouging. But economists don’t usually give much importance to polls. We’re interested in how people behave — how they act. Revealed PreferencesAnd at least in the New York City taxi market, consumers appear to prefer unfair pricing to stable, regulated prices.
One possible counterargument is that consumers prefer fast and reliable availability of rideshare cars, not price gouging. But these are simply two sides of the same coin. Flexible pricing is both a necessary and sufficient condition to ensure that supply matches demand; you can’t have one without the other. So, whatever consumers say, they actually seem to prefer a price gouging regime to a scarcity regime.
P.S. After I started this post, I Posted by John Cochran Some of the same points are raised.
