The Upside of ‘Surge Pricing’ at Uber

The company is criticized for jacking up prices during periods of high demand but economists say that they are simply letting data on market conditions dictate pricing.

This past winter, Jerry Seinfeld’s wife Jessica earned her 15 minutes of fame, fuming over the $415 she reportedly paid to Uber to chauffeur her kids to a bar mitzvah, a price much higher than she had previously paid to get from here to there. Seinfeld famously posted a photograph of the receipt on Instagram, accompanied by the hashtags #neverforget and #neveragain. Leaving aside for the moment that the Seinfelds are faring fine financially, Jessica neglected to mention the upside of Uber’s surge pricing, as this practice is pejoratively called. Case in point — the $41 it cost me to ride Uber from my house to LAX last week, and the $72.16 it cost to taxi back. Uber’s prices jack up and down for basic supply-and-demand reasons. When demand for a ride is high and supply is low, as it is during a blizzard, prices rise. When the opposite holds true, they fall, although no one Instagrams their delight. Experts say this model heralds a new era made possible by access to data and more advanced analytics.

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