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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.
Honey... There's an Uber driver out here who says you're delivering a baby?
That can't be true, my water hasn't even broooooOMG!!!!
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.
Thing is, here in San Francisco, Taxis are doing rather well, despite all the publicity to the contrary.
It's actually quite easy to catch cabs in many parts of the city now and they are often better, because cabs have gotten their act together and are now much more responsive to folks looking for them, and they accept cash. Also, many of the companies now have an app (Flywheel) that can be used just like Uber and Lyft's app. To be honest, I actually prefer Taxis.