Good Research Paper About Critical Analysis
UBER SURGE PRICING
Uber is considered as one company that shook the taxi industry with its revolutionary and modern techniques and availability options. The company works as a referral service that connects passengers from 45 countries to local drivers simply by using their smartphones. The company not only provided rides anywhere but also facilitated with options for the service level or the car from low cost Toyota Prius, SUV, to service level like Uber LUX that provided posh options with Porsche Panameras and BMW 7 series sedans.
Lately a lot of hype and controversies surrounded the pricing model of Uber that is being considered too heavy for the rider. In situations when getting a ride is the only options for the rider they might end up paying as much as $300 for a 20 minute drive in USA. Facing these controversies, Uber management still emphasize the stance that the surge pricing model is beneficial for the passenger as well as the driver.
This paper will analyze the pricing model of Uber and discuss the possible advantages to the passenger, the driver and the company. The paper will also look in to the ways this pricing model is affecting the taxi industry on the whole.
The pricing model if Uber is often referred to as dynamic or surge pricing due to the several parameters in the formula. Uber charges per minute as well as per mile charges that are added in the base fair. These charges might double the fare amount in case of short supply or severe weather conditions.
Uber argues in favor of this pricing model relating it to the supply and demand model. The company confirms that this pricing model is an attraction to the drivers who join Uber. Since more drivers mean more available rides thus this model is equally beneficial for the customer too. Since Uber takes fixed cuts out of fare, it is understandable how much profit can be realized through surge ricing for the company. It is a known fact that Uber has even charged this model in time of natural disasters. While this sounds unethical, this type of model is widely used by airlines and hotel/resorts that have higher rates during holiday seasons.
According to economic experts, surge pricing is a common way to increase supply during high demand seasons. As the ricing goes high more suppliers or drivers are attracted to join the company and therefore the rider can have several instant options.
Since the business model is based on the fact that a rider can have several drivers available instantly, thus to make that happen it is important for the company to attract more drivers to make the service reliable and fast. If the company offers same rates as the other taxi companies the driver might not see the added benefits they could have and thus many customers might be stranded.
The pricing model is not only critical to maintain the business model of the company but also to keep a ready supply of driv4ers with maintained cars.
Considering the fact that Uber provides luxurious and high end cars for rides, their stance about surge pricing seems justified as taxi companies can only provide certain type of cars however Uber takes into consideration the various needs of the customer.
Uber is known for its facilities, availability and convenience across several countries. While getting a ride in a city like New York is easier, however a safe ride in a less developed town could mean stranded for hours. The facility that Uber provides by getting a safe and guaranteed ride anywhere comes with some additional charges. The dynamic pricing model of Uber can mean double the normal rates however it can maintain a healthy demand and supply equilibrium to attract drivers with better rates that they can get with riding cabs. The surge pricing enables passengers to get rides almost anywhere in the Uber covered areas but it also enables them to take rides in luxury and high end cars in severe weather conditions or other events when supply of safe cabs or rides is scarce. Surge pricing can therefore be considered as a driving factor to maintain the business model of the company that ensures the passengers to have a safe ride with a professional and certified driver anywhere.
Popper, B. (2013). Uber surge pricing: sound economic theory, bad business practice. The Verge.
Pullen, J. P. (2014). Everything You Need to Know About Uber. Time.