Honolulu Lawmakers Pass 'Surge Pricing' Cap For Ride-Hailing Companies (reuters.com)

Honolulu could become the first U.S. city to limit fares ride-hailing companies can charge when demand spikes, following a city council vote on Wednesday, the Honolulu Star-Advertiser newspaper reported. From a report: Ride-hailing companies such as Uber and Lyft use a model known as "surge pricing" in which the fare for a ride rises when factors such as rush hour and bad weather increase demand for the service. The practice could be limited in the future in Hawaii's largest city after the Honolulu City Council approved by a 6-3 vote a bill requiring city officials to cap surge pricing by ride-hailing companies, the newspaper reported. For the bill to become law, however, it still needs to be signed by the Mayor Kirk Caldwell, whose administration appears to oppose the measure, Hawaiinewsnow.com reported.

Comments

Supply and demand

[Anonymous Coward]

Let's repeal that pesky law of supply and demand.

Re: Supply and demand

[saloomy]

Any economist worth his salt knows how to create a shortage. Fix prices. If you cap surge prices, drivers won't want to deal with all the drunks at 2 am or after the game lets out. This will result in a shortage of drivers. Sure, some people would be happy to pay them more so they could have the convenience, but the government won't let them. Shitty....

Re: Supply and demand

[cayenne8]

I live in cleveland. After the parade for the Cavs after they first one the championship a trip that would cost $10 was $50

I've seen this happen from time to time here in New Orleans.

There's always something going on here, but I don't see it as a big deal.

I've been dining and drinking downtown and was about to leave, when I see surge pricing on Uber....last time a concert had let out of the superdome I think.

no big deal, I just sat down back and the bar and met folks, hung out, etc....generally had fun and waited 15-20 min or so, and surge pricing went back to normal again and I was on my way.

I figure that's the "price" you pay for not driving your own car and have to wait from time to time for someone else to do it at the price I want.

Re:Supply and demand

[pgmrdlm]

Actually, competition. Uber has been hitting me with huge surge prices at 5pm in Cleveland. for a ride during non busy hours that is 18 dollars, they were charging up to 55. I looked at Lyft, they were at 20 dollars. Uber lost my business, Lyft got it. Competition wins for the consumer every time

Re: Supply and demand

[Type44Q]

What actually ends up happening when UberX/XL surges is that people either wait or become more willing to upgrade to Black/SUV (aka "UberLux" elsewhere), which surges far less often.

That's not surge pricing

[CaffeinatedBacon]

It's not a surge price, it's the normal price. The other times are just off peak discounts.

Re:That's not surge pricing

[jbengt]

The government makes it illegal to pass on the price differential between the cost to the merchant of paying in cash and paying by credit card?

In my hazy memory, it is not government regulations that prevent the store from charging differently for cash or credit, it is the merchant agreement with the card issuer - except that some governments have passed laws preventing that sort of contract.
Anyway, nowadays merchants don't mind dealing with credit cards as much as cash, except where the purchases are small enough that the credit card fee is too high to make a profit.

It will be interesting to see what happens

[N1AK]

It will be interesting to see what difference it makes if there is a cap implemented; though my own opinion is that one shouldn't be.

The argument for surge pricing pretty much boils down to the idea that sellers should be able to charge whatever they think buyers will pay (thus when there is scarcity prices increase) and that the existence of surge pricing encourages sellers to operate when demand is higher increasing supply. I'm yet to be persuaded that surge pricing really makes that much difference to supply at peak times (people who want work were likely to work when their is demand, and people who weren't planning to work often won't be able to respond fast enough to benefit from surge pricing). I am comfortable with the idea that people can make huge profits by selling a scarce resource, but I can see why many people dislike that it is "profiteering" and restricting access to a relatively basic service for those with relatively low incomes.

Re:It will be interesting to see what happens

[Rei]

I think it's important to assess the social consequences of any given policy. For example, a major sporting effect (where some people drink heavily) can often cause high surge pricing. As has been shown time and time again, the higher the price of alternative modes of transportation, the more likely intoxicated people are to drive.

If surge pricing isn't really turning out "new" supply - if it's just that the existing supply goes idle in off-peak times - then is it actually a good thing to have the price fluctuate dramatically, or would it not be better to level it out?

Re:It will be interesting to see what happens

[alvinrod]

I think you need to examine this a little more carefully. The devil's in the details and people who advocate economic controls for social policies tend not to think much further than their pre-desired outcome and don't consider all of potential side effects.

First, does limiting the ability to use surge pricing cause an even greater reduction in the number of rides available such that it leaves even more people to drive while intoxicated? You can't make drivers work for $0, nor can you expect any customers to pay $10,000. Somewhere along that point you'll maximize the number of rides. What makes you think that you (or anyone) knows where that point is?

Second, does the perception of cheap rides available mean that more people are likely to become intoxicated than who would otherwise do so in the absence of cheap rides? In general, when you subsidize something, you tend to get more of it. Additionally, subsidies naturally have to come from somewhere else.

Third, to what extend to pre-planned major events even causing large spikes? If I'm a driver, I already know that when a game lets out that more people will need a ride, so I'm more likely to want to work when I know there's more demand. Uber should be giving this kind of information to their drivers to the largest extent possible such that surges only result due to unknown or unpredictable situations.

Mucking about with systems that we don't fully understand is a recipe for disaster. You're far less likely to achieve your desired outcomes, and will probably get something much worse as a result. Look no further than prohibition or the war on drugs to see how a misguided desire to consider social consequences of policy created a mess among all of the unintended consequences that have arisen.

Re:It will be interesting to see what happens

[cascadingstylesheet]

If surge pricing isn't really turning out "new" supply - if it's just that the existing supply goes idle in off-peak times - then is it actually a good thing to have the price fluctuate dramatically, or would it not be better to level it out?

How are you going to force it to "level out"?

If I only like to drive when things aren't crazy, I'll be glad to undercut all those guys who now try to charge higher prices to make up for their price caps during surges.

Are you going to force me to charge a minimum price too? To make it "level out"?

(Before you call that ridiculous, forcing people to charge a minimum price, either directly or through various manipulations, has been done many times and places, e.g. with milk. Once you start, it's hard to stop fine tuning price controls.)

Re:It will be interesting to see what happens

[N1AK]

I would as well, although that wasn't what I was claiming. I'm saying that when demand is high then it becomes more difficult to attain a limited resource if you can't buy access by paying a premium (surge pricing). Availability might be the same with fixed rates, however if there are 10 times as many people willing to pay the fixed price then each has a 10% chance of getting a lift. With surge pricing the pool of people willing to pay falls so those willing to pay the surge rates are able to get service sooner on average.

Re:It will be interesting to see what happens

[Shotgun]

I think you completely miss the GP's point. It doesn't increase ride availability, and does not directly intend to. It increase ride availability to those willing to pay the surge price. If at a game, concert, et. al., I will either leave early or chill while the crowd dissipates. I'm not willing to pay a surge price, or sit in a line burning my gas in the case I drove. That frees up a ride (or a place in line) for those willing to pay the price.

Great experiment!

[misnohmer]

I for one hope it passes. I'm sure there are many people out there who can theorize what such a cap would do, but nothing beats real world data. So, if it passes, a few years from now if some other city tries to pass such a measure, there will be data to show what actually happened, so people won't end up being labeled as haters for arguing for or against such a law.

Re:Great experiment!

[N1AK]

The UK has considerably increased minimum the minimum wage since it was implemented at £3.60 in 1999 to £7.83 now (notably above inflation) and has seen a decrease in unemployment. I haven't seen any credible analysis yet that shows a clear correlation between minimum wages and unemployment, perhaps you'd like to share some? I assume you must be basing your view on credible and extensive analysis because if you weren't it would be a little hypocritical to claim other people can't argue logically.

Re:Great experiment!

[Anonymous Coward]

The UK also has a massive, undertaxed black economy of common laborers being paid off the books. Tax rates are very high in the UK, for a much higher level of social services such as a genuine universal health care program and much more effective public transit system than the USA has. But it's expensive, and these laborers are *not* paying into it. They're similar to Mexican migrant workers in the USA, but while the UK was part of the EU they were even easier to slip over the border.

I got to know a number of Polish migrant workers in London working on the Olympic construction while I was living in cheap housing as a US IT consultant. Interesting enough men, but they were definitely being paid off the books, and many of their colleagues were basically indentured labor who could not get their passports back from their owners.

Re:Great experiment!

[N1AK]

So you're saying that the minimum wage has caused higher employment in low skilled and low education, then quoting an article talking about youth unemployment. They aren't the same group, and what you've posted doesn't in any way make a strong case that a minimum wage increases unemployment.

Firstly youth unemployment in the UK is low both vs other countries and historic levels, secondly youth unemployment is falling, while the minimum wage is increasing, thirdly the minimum wage for young people is lower so if a higher minimum wage increased unemployment you'd expect to see youth unemployment decrease more as employers stopped employing older more expensive employees.

But even if you weren't using an article that didn't relate to the group that you originally mentioned, and if that material made any kind of case that the minimum wage was a cause of youth unemployment and could be done as evidence then all you'd have done is argued that the minimum wage had decreased overall employment while slightly increasing it in one group which would still be a good thing for the country as a whole.

Re:Sad

[Anonymous Coward]

the people will just go to regular taxis instead. that's who pushes bills like this in the first place.