That's a STRONG price signal that will bring more cabs into the marketplace at peak times. $500 fares won't happen often or for very long-- I'd fire up my own ride and pick you up for $250!
That's a cool idea of crowdsourcing peak times. You sign up to get texts when people are willing to pay for rides above a certain threshold and then just drive your car out to pick them up.
I'd use it (and possibly do it, although hard to say and it'd have to be for a ridiculous amount of money ~100+ range/trip).
There would need to be a reputation component like airbnb; otherwise, you would run the risk of shady people picking you up knowing that you have >= $x dollars on you and steal it.
According to the article payment is handled via credit cards in the backend so you could have $0 on hand. Your broader point definitely still stands.