This Surge Didn't Work Either: Uber Withdraws Price Hike During Sydney Hostage Situation


I'm a regular user of Uber, the smart-phone-enabled ride-sharing service that has upended traditional taxi service in the dozens of cities it serves.

But goddammit if the people running the show at Uber aren't just turning out to be terrible. Not only are they getting in bed with the very municipal governments that were trying to cab-block them, they did this in Australia:

After an armed gunman took patrons of a Sydney chocolate shop hostage during rush hour Monday morning, the transportation company Uber quadrupled its fares for panic-stricken customers fleeing the central business district.

It charged a minimum of $100 ($82 U.S. dollars) to escape.

As the Sydney Opera House and other buildings were evacuated and images flashed on TV screens of hostages holding a flag bearing the message "There is no God but Allah" and "Mohammed is the messenger of God," Uber tweeted it was raising prices.

The company has defended what it calls "surge-pricing" as necessary to encourage more drivers to pick up passengers when demand is high.

Within an hour, Uber backtracked after the media publicized customer complaints of price-gouging.

More here.

Take comfort in that last bit, folks. Part of the market process is customer feedback and public relations. Early on, Uber had great p.r., partly because they were (and still are) providing a service people really want at prices they're willing to pay. But given the company's mounting "asshole problems," they really need to think things through a bit more. It's one thing to enact surge pricing during rush hour and even really bad weather events (most riders are grateful for rides even as the price gets dear). But there are going to be times to take a pass too.

Other surges that failed include the one in Iraq and the one in Afghanistan.

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  1. Other surges that failed include the one in Iraq and the one in Afghanistan.

    And the connection is..?

    And are you comparing price gouging to war? Is this Huffpo?

    1. Is he calling reacting to demand by changing price to make supply match it price gouging?

      He sure seems to be.

      What happened to economics?

      Reason is worthless anymore; between abandoning economics for “feel-good pricing”, and “cops are always bad, stop thinking” reporting over the past months…

      Makes me confirmed in my decision to stop subscribing.


      1. (Okay, that’s unfair to Nick, who wasn’t quite arguing that.

        But would Uber get a pass from PR on “no cars available during the emergency” either?

        Sometimes – like when you’re a company that wants to actually do things with sane economics to serve people better, the right thing to do is to remind people exactly why “surge pricing” works, and how it gets more people service.)

        1. I agree. So-called “price gouging” triggers something deep in us humans, to our own detriment. Arbitrage may bring profits to certain people. But without free price signals we have perverse effects such as no supplies being available at all, at any price.
          Essentially, the choice is between a marginally higher price, or an effective price verging on infinity.

    2. If I wasn’t actually a hostage, I would try…ummm… walking?

  2. What other incentive would Uber be able to use to bring more drivers into a potentially dangerous situation? If I’m a driver for Uber, why go out of my way and possibly endanger myself and/or my vehicle without hazard pay. Uber can’t make their drivers go pick people up. It’s the sharing economy, not an hierarchical corporation. If demand spikes, prices go up to help meet the demand. If they didn’t, most of those needing an Uber ride would not have that option. This is such basic economics, you’d think Nick would have this one figured out.

    1. If Uber wanted to obey economics AND get good PR, they should have upped how much they paid drivers while making the rides free, eating the difference and writing it off as marketing.

      But Nick is flat wrong on this one. The examples I have always used involve emergencies, such as hurricanes and earthquakes, and this is no different.

  3. Nick, respectfully speaking, but what the fuck?

    Perhaps you’re not entirely aware of how Uber works. See, Uber institutes surge pricing and then text messages its drivers to let them know that surge pricing is in effect. That’s so the guy who wouldn’t normally be driving that morning will be incentivized to start driving. These kinds of incentives are necessary when you’re asking drivers to enter a dangerous area and when demand is high.

    I am disappointed by your complaint here. It smacks of ye olde “price gouging” trope. It should be further noted that Uber notified users and made them affirmatively consent to be charged this amount. So what’s the harm?

    1. Worse = i can’t bear to think that Nick is on the same page as Mark Ames.. on anything

      I was going to make the same point as you – that price gouging is typically thought of as ‘un-transparent’ and engaged in by individuals who are able to temporarily monopolize a product/service; not a top-down decision by a company that is per-announced in an attempt to dramatically increase supply

    2. I think Nick’s complaint is that while this policy is economically sound, it can make for bad PR. Of course, I don’t agree with him that Uber should roll over just because economic illiterates will get their panties in a bunch.

      1. this policy is economically sound, it can make for bad PR.

        If that’s Nick’s logic then why is he a libertarian?

        1. Companies wouldn’t be free to make economically unsound decisions in a free market?

        2. Bad PR can affect the economics of a situation. However, I don’t see where he is arguing that this is good economics but bad PR; He seems to just be saying that Uber is being a bunch of meanies for daring to have demand-based pricing outside of times he approves of.

      2. If only there were some libertarians in the media, who could perhaps mitigate the negative PR aspects of this “surge pricing”, by explaining all that complicated supply and demand stuff. That sure would be cool.

        1. Paging Walter Williams.

      3. That’s what I got out of it, too. I suspect that Nick is saying that it’s a boneheaded PR move for Uber. Most folks don’t understand that rising prices stimulate production, and so they see it as crass.

        While it may or may not be good for Uber, I personally am comfortable putting forth a full-throated defense of surge pricing, and I hope other libertarians (including Nick) will be as well. It’s a teachable moment, and it’s a very easy thing to defend in humanitarian terms that will resonate with lefties.

        I usually say something like this: When prices can float freely in real time, they keep supply (drivers) in equilibrium with demand (people who need rides). It’s especially critical to allow this mechanism to function during emergencies, as rapid price spikes quickly mobilize resources to where they are needed. Price caps, by contrast, cause shortages that leave people stranded without the resources they need.

  4. Something something cocktail parties full of economic illiterates.

    1. And historical illiterates. The Iraq surge worked.

  5. Nick can claim that the Iraq surge failed all he wants, but he’s still wrong. Peacenazis get real bitchy when evidence comes to be that doesn’t comport to their worldview. They double-down on reality-denial.

    Nick is also stupid for criticizing Uber’s surge in Sydney. This is how you get more rides.

    1. Paying Sunnis to stop fighting Shiites and instead go after the beheader types was what worked. Adding 30k troops did little to nothing but provide more targets for IEDs and snipers.

      1. The increase in soldier’s was vitally important, as was their deployment in small bases.

    2. How did the Iraq surge work?

  6. Dearie me, and here I though the whole point of demand pricing was to be able to react to crisis situations of varying levels.

  7. I don’t see the big deal. Okay, it’s tasteless and not very cricket but I doubt anyone’s wanting to go near a hostage situation without some incentive.

    1. “Not very cricket” is a new one to me.

      1. It’s quite British, don’t you know. Old boy.

      2. I use Britishisms as a kind of sarcasm. Kind of like the textual equivalent of the droll voice/eyeroll that might accompany “yeah, that’s just too bad”.

    2. Tasteless? Uber really has little idea of what is going on in a given spot – it just knows that demand has suddenly gotten very high and the public needs more drivers.

      Gillespie’s preferred solution apparently would be to…not have drivers at all, instead of having some high-priced ones. That’s socialist (I mean that literally) logic.

  8. I fail to see the problem here, Nick. Getting in bed with Muni governments is fucked up. This is not. It’s economics, and it’s the foundation of Uber’s business model. Anyone who seriously thought their life was in danger would’ve gladly paid the premium to be removed from that danger. Anyone who didn’t was just jacking off anyway. To say that Uber should continue to provide this service with no surcharge is to posit that Uber drivers are somehow less than human, and that their lives are not their own to risk, or not risk, according to the reward. And the asshole in the first picture paid that price willingly, but then decided to reneg on the deal after the fact. Fuck him. He needs to learn that behaving in a less than rational manner can be expensive. He probably accuses late night infomercials of being thieves, too.

  9. After thinking about it for a minute, I have a serious question. Did you lose a bet Nick? What was the lefty journalist article gonna be had you won. Because there’s no way you’ve been working for Reason this long, with all of the free market economist who’ve been interviewed by the magazine and involved with the Reason Foundation without learning how prices work.

    1. Don’t forget how he compares what Uber’s doing to war.

  10. “But there are going to be times to take a pass too.”

    looks like the drivers agree.

  11. If I was Uber, I would have implemented surge pricing for the drivers – pay them the large rate and actually just give away the rides. I know it is costly, but it could have been a huge PR win. It may have not only increased the loyalty of riders but also the loyalty of the drivers.

    1. That’s a fantastic idea.

      I am still nominally an Uber driver, but I can tell you that they don’t do right by their drivers, so I’ve stopped bothering. 50c a mile? Fuck you, Uber, that’s bullshit.

      I’m still in favor of the ridesharing model, and I have nothing but good things to say about Lyft, but Uber, from my limited perspective, is grossly mismanaged.

    2. This is what they ended up doing. Shame that won’t be communicated as widely as the initial THEY CHARGED VICTIMS MORE MONEY!

  12. Meanwhile public transportation had quit operating, giving people not many options…

    1. You mean, they raised their price to INFINITY?

  13. Why does *Uber* need to control this? Why not set up the app so that the drivers themselves can vote to turn on surge pricing – along with the ability for a driver to (anonymously) opt-out?

    If the drivers try to abuse this then that leaves room for a competitor to move in and even their own drivers have an incentive (and ability) to control abuses.

    1. Just make it a straight auction with a very short time limit, like 15 seconds.

      1. No, that was too off the cuff.

        Let logged-in drivers change their asking rate at any time. A ride request would show wait times and prices in the area and the rider would choose. Give drivers 15 seconds to opt-out of the specific ride auction.

        Or something like that. Take the central planning out of the system.

  14. Everyone is acting like someone is sitting in front of a screen and raising prices based on the news. What is more likely going on is that when the software detects a large increase of activity, it starts raising the prices based on some algorithm looking at how many are looking for a ride vs. how many drivers are available. That being said, if they weren’t assholes, they would put some more reasonable limits on the surges. Or, even better, people should uninstall the Uber app and let them know why.

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