StuartW wrote:
Drafted half this last night, and have kind of lost the thread a bit, and can't really recall all the stuff I intended posting. And can't be bothered going back over RTD's voluminous posts to cover everything, but this is just a few thoughts about surge-pricing and its applicability to the trade etc.
RTD wrote:
There is an argument that Uber does price gouge. But again this is down to supply and demand.
If they had enough drivers on the road the prices would not increase significantly. It's required to meet demand.
If enough drivers get on the road the price decreases and an equilibrium is met.
Correct me if I'm wrong, but that's what they call neoclassical economics?
But the other side of the market clearing/equilibrium model is that customers are paying significantly higher, and at times huge multiples would be required to balance supply and demand.
Which is why I think your preferred model simply isn't going to happen anytime soon - the chances of regulators deregulating hackney carriage fares in the near future are less than zero, in my opinion, because early hours undersupply is going to get worse in the short- to medium-term, I suspect, which is when the women's safety stuff and suchlike comes into play, so policy makers simply aren't going to let it rip anytime in the near future.
Ditto regulation more generally, and although I think some of the ULEZ and CAZ stuff is well over the top, and obviously happening at the worst possible time, the chance of any major reversal in that regards seems limited (although I suspect there will be a stay of execution for many until the wreckage of the pandemic becomes a bit clearer).
Which in turn raises another big question in relation to your several thousand words about the 'taxi' industry. Do you mean hackney carriages, private hire, or both?
But as regards your promotion of a surge-pricing model, it's perhaps worth pointing out that (I think) all 350+ UK councils have different HC tariffs for unsocial hours, and some have them for weekends and 'party' tariffs applying after midnight (say), and on public holidays. And all have them over the festive period, as far as I know.
So that's a form of surge-pricing, although very crude, obviously, and certainly not dynamic in the sense of Uber's.
But there is an element of dynamism in even HC fare-setting in that discounting is commonplace in some areas. Which of course is the opposite of the dynamic, market-clearing surge-pricing approach you're advocating, but to a degree it's just the market introducing a bit of price-flexibility where council-regulated HC tariffs are set above what might be called the market equilibrium rate.
But in turn that maybe points towards the competitive nature of the market, at least in some areas, but which perhaps indicates the limited applicability of surge-pricing, and why other firms haven't adopted it, at least to the extent that Uber has (of course, historically the technology simply hasn't been available to support a fully dymanic Uber-style pricing model). And, of course, a crude surge-price model in the form of unsocial hours premiums etc has effectively been the norm for years, as mentioned above.
But at least one major provincial operator recently trialled surge-pricing, but gave up fairly quickly because of customer complaints. But didn't Boro Cars introduce a fixed surcharge at busy times which customers could use to effectively jump the queue and get priorty service? Again, that's not surge-pricing, but is a further refinement on the unsocial hours premiums.
But to be honest I find it difficult to get my head round Uber's surge-pricing model and how that works in terms of customer loyalty etc. But I suppose a small proportion of customers are largely price-insensitive, and will pay the price simply to secure a care immediately when they can't get one elsewhere. And while Uber may take a hit in that regard as regards customer loyalty, maybe they just think that's a price worth paying (pardon pun), while on the other hand, as a major brand they know that they can at times charge a premium price and get away with it.
But maybe the surge-price model not so easy for the more traditional providers, even assuming they have the software in place to handle dynamic pricing. Another constraint may be that traditional PH providers are competing with HCs, which obviously can't surge-price beyond the regulated tariff, whether on the ranks, or on circuits.
Moreso when PH and HCs are working on the same circuit - they can't have PH surge-pricing while HCs doing the same pre-booked work are constrained by the council-regulated tariffs.
As for airlines and the like, it's of course worth pointing out the existence of the Ryanairs and EasyJets of this world, which while are no doubt good models in terms of dynamic pricing, aren't really compatible with premium pricing per se.
And, of course, the history of the airline industry hardly demonstrates an object lesson in stability and consistency, so there's maybe a lesson of sorts there.
But, who knows, there may be a place for more dynamic pricing in the future trades, with Uber blazing the trail, and helped along by the adoption of the relevant technology.
But in the meantime I tend to think of pricing in the trades more in terms of something like restaurants, which may charge more at Christmas time, say, but their pricing isn't really dynamic in the Uber sense.
You are as bad as me with the thousand words.
I am referring to PH as opposed to HC.
The terms used for the different economic models over the decades and centuries get changed and the meanings reversed so leads to a lot of confusion.
I keep it simple by stating there are two distinct models. Free market capitalism and the other is government interference.
Generally, the more the government/authorities intervene the worse they make things.
The free market always takes care of itself. It's not a perfect system (we are human after all) but it is the best system we have as opposed to all other economic systems which without exception have all failed from communism to fascism to socialism etc.
Obviously we have had neither of those nasty systems (at least since the industrial revolution) in our highly civilised nation but we are well on the way if things don't get reversed.
Basically the more the government intervenes in markets the closer we get to socialism or communism or whatever.
Intelligent thoughts you make on these matters and yes there is probably no chance of any deregulation on the horizon. I am under no illusions. The councils arrogance and ignorance is astounding.
But they will start to backtrack sooner or later. Their policies will backfire. More drivers will leave in droves due to their congestion charges and newer vehicle requirements etc.
They seem to think taxi drivers are making out like bandits so their thought process is they will sit there and absorb all these costs.
I will say this. All this regulation is just going to make the taxis more expensive for the public. The costs will be passed on eventually to them by the drivers. Some will pass them on immediately but a lot won't.
You are correct in stating that there are some attempts by the councils in setting peak time higher fares up and down the country via their tariffs. It's nowhere close to where it would be if operators/drivers did this on their own accord in their own local area of operation.
The customers are going to complain like hell against any firm that introduces surge pricing. I didn't say it was going to be easy. The story you say of a firm recently trying it and then getting scared does not surprise me. It will take a lot of courage and thick skin to get through it and be persistent. It will involve a lot of trial and error. But it will work.
In relation to getting your head around how Uber seem to manage customer loyalty with their surge pricing. I don't know with any certainty but I think their customers are aware/knowledgeable now that Uber will charge more at peak times ie Saturday nights etc.
Customers just accept it now because they have been doing it for a long time since their inception. That's why the rest of the trade will manage if they change and stick with it. There is no such thing as loyalty in business, anyway. In a free market no one company will have all the business even if they are the cheapest company around. It's impossible. That's why a lot of firms can change their models successfully.
They will probably have their regular customers during the week that use them for going to work and other journeys and their younger sociable crowd that party and go out on weekends who are used to their surge pricing week in week out.
They will also have customers who adapt to their model and avoid using them at peak times and use them at other times. They probably use all the independent PH firms at peak times who are stupid enough to take them home for less than half the price Uber does and then use Uber off peak. It all balances out.
You make an important point with the airlines by highlighting the budget companies such as Ryanair. There will always be competition in any market that will offer a cheaper service. I am not saying all taxi firms should use surge pricing. But most should. There is always going to be budget firms going around like idiots for peanuts. There are niche positions in most industries. It's human nature.
Please note that a lot of airlines if not all make their profits predominantly from business class/first class customers who are charged a premium over standard customers.
The business class customers basically subsidise the economy class. The airlines barely make any profit from the majority of standard customers on each and every flight.
This is what I am suggesting for the taxi business. Charge significantly higher prices on Saturday nights from 6pm til 4am (just an example) and rush hours on weekdays where demand outstrips supply and charge a lot less for customers during the week at normal or off peak times. Peak customers subsidise off peak customers.
The pricing structure will vary from place to place based on many factors but that is the general idea and it can be implemented successfully.
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