Surge Pricing is economically sound and has been around for a long time!

Lately surge pricing is getting a really bad reputation.  Many people call for its elimination and say that it is only used to take advantage of a consumer who needs a service or good.  To those people who claim this, I’m sorry but you couldn’t be more wrong.  Surge pricing has been around long before Uber brought it to the forefront.
Surge pricing in its purest form is the price of a good or service of fixed supply as you move up or down the demand curve for that given good or service.  So if you hate Uber for using it, you should read up on the laws of price, quantity, and demand.  Also surge pricing has been around you for a lot longer than you think.
Barring economic or environmental shocks, the supply of gas is relatively fixed.  If there is a shortage, one country or another in the global marketplace makes up the gap (see article below).  The price of gasoline is seasonal, what drives the price with a fixed supply?  The fluctuation in demand, think of it as seasonal surge pricing.  The summer driving season increases demand which increases the price, which oddly enough, no one complains about this as much as they do when Uber raises prices on a given night.
The point of this brief post on surge pricing is that it is NOT some big evil company trying to hit you when you need them most.  It’s a company that (like all business) has a goal to maximize its profit (and this is not evil).  Legislation which puts limits on surge pricing only seeks to regulate and diminish the free market for goods and services.  Rather than calling for regulation, if Uber charges too much, don’t use them!  If gas is too expensive, advocate for higher production and less regulation or don’t drive; if enough people do as you do, it will lower the price.
Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s