Any time there is an "atmospheric anomaly", one of the favorite pastimes of the otherwise bored punditry is to observe just how much Uber's surge pricing will soar at any given time and place, and to respond with howls of indignation at the intersection of the supply and demand curves. Well, during today's "Blizzard of 2015", Uber's "unfair" surge pricing model will be very much impaired in the city whose mayor some say is a "radical leftist" on par with Greece's Tsipras.
From Bloomberg [4]:
“We expect to have a serious problem on our hands,” New York City Mayor Bill de Blasio said at a press conference on Sunday. “We are facing one of the largest snowstorms in the recorded history of this city.” At 8:30 a.m. New York time, one Uber user tweeted a screen shot from his iPhone that showed Uber pricing -- which usually fluctuates based on demand -- at 2.9 times regular rates. Prices soon dropped to normal.
“Price gouging in the context of an emergency is illegal,” de Blasio said at a press conference Monday, encouraging users to report the practice to the Taxi & Limousine Commission.
Sure enough, the ratting out of Uber is doing miracles in the Nanny city, which moments ago blasted out the following:
Due to the State of Emergency declared in New York City, prices will not exceed 2.8x the normal fare.
This reflects Uber's national policy developed with New York Attorney General Schneiderman that balances the goal of reliable transportation options with affordability during disasters: Anytime a disaster or state of emergency strikes, dynamic pricing is capped and all Uber proceeds will be donated to the American Red Cross to support relief efforts. On your receipt, you will see a donation from Uber to the American Red Cross.
And indeed, a screengrab taken moments ago of the surge pricing in one of New York City's busiest regions reveals a modest 1.4x surge price hike:
[5]
However, a short trip across the river, in a different, unconstrained, city and state, reveals something quite different: the following (screengrab taken at exactly the same time as above):
[6]
How long until Goldman's correlation desk finds a way to monetize the "Uber" arb?
As a reminder, this is what Uber says about its fuzzy logic [4]:
Uber says that simple supply and demand drive its surge-pricing algorithm, and it is seeking a patent for the technology. The company says the feature is useful to encourage drivers to respond to increased requests during peak hours, in inclement weather and on holidays.
And now Uber can also patent the "fairness" fudge factor when it comes to the most basic forces of supply and demand, courtesy of de Blasio. Sadly, like every socialist intervention in fair and efficient markets, there are immediate tradeoffs. Ubers lists these as follows:
- Higher than normal ETAs: Please be patient as demand for rides may be higher and wait times may be longer than usual
- Limited destinations: We have reminded partners of the importance of driving safely in inclement weather - in areas where there is uncleared snow, driver partners may not be able to pick up or drop off riders
Is it time yet for a "fairness" discount in the next Uber capital-raising round?