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Uber Plans To Kill Surge Pricing With Machine Learning (npr.org)
An anonymous reader writes: Surge pricing is a familiar term for any regular Uber rider -- or driver. It's when you call an Uber, and the price of a ride is two, three, or four times more as a result of greater demand brought on by a sporting event or weather event nearby. For riders, it's an annoyance, but for drivers, it's a perk as it usually results in more pocket change. Inside Uber, surge pricing is considered a market failure, and a problem to be solved. "That's where machine learning comes in. That's where the next generation comes in," says Jeff Schneider, engineering lead at Uber Advanced Technologies Center. "Because now we can look at all this data, and we can start to make predictions." Everyone knows that when a Beyonce concert ends, for example, there's going to be a lot of demand for Uber drivers. Schneider explains, "[What's harder] is to find those Tuesday nights when it's not even raining and for some reason there's demand -- and to know that's coming. That's machine learning." With enough of the right data inputs, computer algorithms can do the research that Uber drivers already do -- only better, "so the surge pricing never even has to happen," Schneider says.
when the whole point of Uber is to be flexible for drivers.
It's not. And no matter how flexible you might want to be for drivers, passengers are not out there at the convenience of the driver.
Also, surge pricing is a perk for the passenger, because it means a ride is actually available.
Surge pricing is just supply and demand. If you don't like it, you are free to go wait at the taxi stand for an hour in the rain.
If surge is low, it isn't worth a driver heading across town without a fare just for a 20 or 40% bonus in fares (especially if surge is gone by the time he gets there). Low surge doesn't do much to increase supply.
However, if surge is high, customers won't want to pay. At least in my market, taxis are still a perfectly viable option (and can be flagged off any street corner), and last I checked, a surge of 1.7x or more made UberX more expensive than a taxi. I would also be willing to take a bus or ride a bike in some instances (or simply wait for surge to go away). I think I have only paid surge over 2X once, and it was for a short ride where the money just didn't matter much.
High surge is great at reducing demand. This helps clear the market and is overall a market success. Unfortunately, Uber is in the business of selling you a ride. Reducing demand for their own product is not exactly a success.
The only times that it is really a success for uber are times where many drivers expect surge in advance. New Years Eve is a great example of this. In my city, there weren't crazy surges on NYE like there were a few years ago. Drivers knew there was money to be made and they went out. They may have been disappointed that they weren't seeing huge surges (averages were less than 2...probably a lot in the 1.2-1.4 range), but they were out there driving, and customers were surprised by the low fares and took more ubers.
I think the idea is that they could use machine learning to predict the non-obvious times. Get drivers on the road in time to meet the demand...thus increasing supply rather than decreasing demand.
Bottles.
Can anyone justify Uber's existence?
Can you justify your own existence? What I find remarkable about babble like yours is how little understanding there is of consequences. No one has the understanding of society or reality to decide who "should" exist. It'll just create destruction obstructions to human progress by people too stupid and short sighted to create the sort of things, like Uber, which they are judging.
My view is that Uber's existence is sufficient justification for their existence.
When prices go up, it pushes consumers to consume less. You still get a market-clearing result--everyone who needs a ride is able to get one quickly, because those people who can wait or go by some other means (or can't afford the new price) will remove themselves from the market.
Turns out that the effect on demand is much stronger than the effect on supply. Customers drop their requests faster than drivers can get to the area. Uber probably sees it as a failure internally because they make less money when prices go up (even though it is still a success at ensuring availability and short wait times).
Bottles.