News and notes from around the interweb:
- The real reason Delta is pulling out of Dubai
- American AAdvantage is offering up to 90,000 miles for Australia roundtrips in full fare economy or above through the end of May.
- Baby steps getting the Bahamas Baha Mar resort project moving again though that’s little solace for those with cancelled reservations and little compensation.
- Starwood is now offering an assortment of ‘member exclusive rates’ which give you up to 10% off. Lots of restrictions, including prepaid, you may be better just booking a AAA rate for about the same price. This comes only days after Hilton introduced an HHonors member discount in select cities.
- Steaks on a Plane: Following your United Airlines meal from the kitchen to the clouds (HT: Joel G.)
- One study suggests Uber’s surge pricing may not add drivers into the system (HT: Reid F.) This summary, though, unintentionally reveals the genius of surge pricing which is rationing supply and allocating it to highest valued use:
Unless time is of the essence, you’re probably better off waiting several minutes and getting a lower-cost lift.
If you are patient and keep rejecting the Uber surge pricing, usually it will go away (or at least down) within 10-15 minutes.
In theory, surge pricing should both increase supply and decrease demand.
I’d also heard a rumor that Uber keeps track of how often and frequently you accept the surge pricing, then they offer you more surge pricing based on your past willingness. That’s pretty bogus, if you ask me. But, there is another app that shows you where Hoover is currently searching and where to move so that you can be out of the surgeon’s own. It has been pretty handy, sometimes allowing me to move merely a block or two in one direction to be out of the zone.
@ Gary – I remember (quite a while ago) when I complained of UBER’s surge pricing as just price gouging in another name, you (nicely) scolded me by saying that the economic theory behind it is sound.
You and I differ in our economic ideology, but the results that come from this study (and many more to come) were exactly what I predicted, because the theory – increased demand leads to higher prices leads to reduced demand and market equilibirium – assumes that these actors (the passengers AND the drivers) are behaving in economically rational ways.
The reality is that a driver won’t just get on the road because the price goes up, any more than a passenger will pay accordingly if it’s pouring with rain. The reality is that to get a driver on the road at midnight in the pouring rain is going to require more than simple cash in the hand. The reality is that surge pricing is designed to make UBER more money when demand is high, not to provide the consumer with more service at peak times.
In the same way that many poor people on food stamps may vote for a Republican who is against same sex marriage rather than a Democrat who vows an increase in their benefits, or a hedge fund manager may vote for a Democrat who fights for environmental laws rather than for a lower tax rate, standard (dated) microeconomic theory looks increasingly inaccurate. Humans are not rational, and money isn’t everything.
@Joe – In the interests of fairness I share that there’s one study, lacking a whole lot of data but a study nonetheless, that suggests a different conclusion. I’m highly skeptical of the study, and don’t think it shows what most people claim, but it’s important to ground in facts.
Thanks, Gary. I don’t disagree that the jury is still out, but I maintain that surge pricing during peak times will (a) not lead to more cars on the road and (b) (as a logical conclusion) lower prices as supply meets demand. Rather, surge pricing at peak times will remain in effect no matter how many more cars are on the road, as long as passengers are willing to pay. That, to me, is simply a dynamic pricing, and no different from what airlines and hotels do.