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This wasn't an "automatic price increase" unless software got really good at explaining why they were increasing prices.

http://cl.ly/image/2U3l242l350p/Image%202014-12-15%20at%2012...

"We are all concerned with events in CBD. Fares have increased to encourage more drivers to come online & pick up passengers in the area."

Somebody wrote that sentence, and it's a gross one. The same doesn't belong on the Post, it belongs on the person who wrote that and upon the culture that allows for sentences like that to be written.

That doesn't discount the fact that the surge pricing algorithm is still automatic. They don't have people sitting at their evil corporate HQ clicking buttons trying to maximize screwing people over.

No, but they knew what they were doing and can't claim they didn't choose to continue.

Although it's possible (no idea whether it's the case) they didn't have a mechanism to shut it down, on the time frame they would have needed to.

We can't philosophically disprove it. But Occam's razor applied to the behavioural evidence suggests Uber thinks surge pricing is fantastic, and keeping it in place during crises is corporate policy unless and until there's a media backlash large enough for it to actually get through their thick skulls that people are pissed off.

Presuming Uber thinks surge pricing is fantastic, wouldn't it be all the more likely they wouldn't build in a mechanism to disable it at the drop of a hat?

Possibly. But it's a red herring considering the issue is moral culpability and whether their behaviour is socially acceptable.

Their behavior, at this point, was "pay drivers out of their own pocket to help get people away from the emergency". It's hard to call that "socially unacceptable". It arguably took longer than it should have, but it takes time to make decisions in any large company. Hopefully they will learn from the experience, get better plans in place, and clarify policies for the future.

I wouldn't be surprised if surge over a certain % requires human intervention.

No, but that very algorithm was designed and implemented by humans from their big evil corporate HQ.

How do you know ? Do you work there ?

No offence, but you have absolutely no idea what you are talking about. Surge pricing is indeed an automatic thing. It triangulates demand in a particular area and if there are not enough Uber drivers to meet the demand, the price increases based on the demand and supply, thus bringing more drivers into the city and then eventually bringing the price down. There isn't someone in an office somewhere going, "Ooh, a hostage crisis, lets bump surge pricing by a factor of 4 for some sweet profits"

The person who wrote that sentence explained what happened, of course a real person wrote it, it's a blog post. Automatic surge pricing kicked in, like it does anywhere in the world because there was high demand and not enough Uber drivers. While the app is smart, it can't automatically detect when there is a hostage crisis happening in the area and turn off surge pricing...

Such an uninformed response from the likes of a Hacker News user is actually worrying. I thought everyone here mostly understood how Uber works, obviously not.

Your post reads like you are being purposefully obtuse.

Here are the facts:

0. There is a demand to leave the CBD due to a hostage taking.

1. 4x surge pricing kicks in

2. The person who tweeted about about being concerned with the CBD events was obviously aware of the CBD situation since they tweeted about it

It may have been an algorithm that increased pricing to 4x. But it's clear that Uber can (and will) reduce pricing or cover fares in certain emergency situations.

We know this because that's exactly what they did an hour after tweeting about 4x surge pricing. There's no reason they shouldn't have been able to do this when they tweeted about surge pricing in the first place.

I understand that prices went up as a result of demand going up. And in the event of it being new years, rainy, a parade is in town or whatever, that's reasonable.

I don't understand how a human being can write a tweet like that explaining the price increase, for that price increase to stay in place for an hour, and only after significant blowback, for them to say "oh, we'll not charge riders."

That to me is the part that's actually worrying.

Why would that be worrying? A lot of people wanted to leave the area all at once. There were not enough drivers in the area. To attract more drivers, they need to offer the drivers an incentive to get out there and drive. So they raised the price. It makes perfect sense and I see no ethical issues in what Uber did.

All of this Uber hate is getting ridiculous.

I think the point is that, while surge pricing kicked in automatically, they could have disabled it when they realized why it did so, instead of writing a blog post explaining it.

Is this not what happened? Surge pricing kicked in, shortly thereafter, Uber made all trips out of the CBD free and then offered to refund anyone who made a trip during the surge pricing and was charged. I believe the blog post came afterwards, wouldn't make much sense to write a blog post before they made it right. People are complaining about how long it took Uber without having any kind of understanding how its system works. For all we know, disabling surge pricing isn't as easy as clicking a box in some kind of admin panel.

No that's not what happened. They first tweeted to acknowledge the increase of price during the hostage crisis. It's only once the backslash started that they made the trips free.

If they would have cancelled surge pricing after immediately discovering the surge was related to the hostage crisis, then there would be posts on here condemning them for putting peoples lives at risk or some other nonsense. Either way the groupthink at least on HN is that anything Uber does is Automatically Evil.

"This story makes it sound like Uber deliberately turned on surge pricing to capitalise on what was going on, which is not the case"

Isn't that exactly what surge price is for on Ubers business side of view?

No, surge pricing is to get more drivers to go to the area with high demand to pick up the people who eagerly want to leave. The article didn't explore if it worked (as it probably should have, in the interest of honesty).

It's very important to keep in mind that the alternative to surge pricing isn't cheaper cars, it no cars (or, more accurately, much too few cars). If there were plenty of cars available, the surge pricing wouldn't have kicked in.

"No, surge pricing is to get more drivers to go to the area with high demand to pick up the people who eagerly want to leave."

That's what Uber claims all the time. Why does every one believe their very own narrative? Why isn't it enough to tell their drivers that there is business at location X and they'll show up? I mean, like it normally works too.

Because Econ 101. The article mentions that at 4x surge pricing, the minimum cost was $100. That implies that normal minimum cost is $25.

For $25, you can go several kilometers in a regular taxi[1] - ie, Uber, even at normal rates, represents a significant premium over regular taxis.

If you're correct, that merely telling people that there's a spike in business somewhere means supply will flock to the demand, then it follows that there would be plenty of regular and much cheaper taxis for people to take. So, if you're correct, the only people who would take Ubers in the area are the people who love Uber so much that they will pay a premium of maybe $80 for the privilege of fleeing a scene of terrorism in an Uber rather than a taxi.

Or, maybe you're wrong: Perhaps merely telling taxi drivers that there's business available is not in fact enough to get them to go take it.

1: http://www.taxifare.com.au/rates/australia/sydney/

I simply refuse to believe, that the _only_ effective way to tell drivers of any service (Uber, Lyft, regular cabs) that there is a huge demand somewhere is to hike the price x times.

Of course I might be wrong - I haven't tried to run a cab service ever.

Edit: Or asked differently - why is surge pricing 4x or sometimes even 5x? Why isn't it like 1.10x? My guess it's profits 101.

I've definitely heard rumours of drivers that drive only during surge periods. No idea as to the veracity, but clearly the higher you hike the price the more people will find driving worthwhile.

I suspect that's unlikely. The drivers I've talked to (London) say that surges are short and geographically isolated: They're only worth it if you're already on the road and fairly close to the affected area.

Good point. On reflection, I suspect the context was predictable surges (New Years Eve, &c).

Well, now you're moving the goal-posts. Nobody insists that this is the only way. But it's a way, and it appears to work well - and it's perfectly consistent with one of the most basic and uncontroversial tenets of economics.

It's obvious that Uber is an experiment on many levels. Their approach to public policy and regulation is one, another is whether users will accept a priority of better availability over uncertainty of prices (and so the risk of feeling fleeced), rather that the "old style" total certainty of prices over uncertainty of availability.

Depends on the relative elasticity of supply and demand.

1) If demand becomes more inelastic with respect to price, you can raise prices more than you will reduce rides, allowing uber to pocket more money.

2) If supply is elastic with respect to price, more drivers will be ready to provide rides as prices increase.

Uber is saying it's purely case 2 because that sounds like better PR, but any profit-maximizing business that knows any marketing 101 is going to seriously interested in case 1.

case 2 is questionable - how elastic is the supply? The supply of drivers is limited - there are only so many uber drivers. The question is, if you raise prices 4x, will you get 4x as many drivers or something less than that?

If you can raise your price without reducing rides (1), your prices are too low to begin with. Does Uber really strike you as the kind of company that would leave money on the table like that, only incur the wrath of users by raising the price when it rains? That's really poor marketing.

> The question is, if you raise prices 4x, will you get 4x as many drivers

Nothing in the surge pricing argument is predicated on that relationship being in place. As long as the relationship is positive, surge pricing works. Presumably, Uber has a data-driven model that allows them to calculate which level to surge to to satisfy a given demand - which is probably the same model they use to set base prices - if the model consistently suggests a 0.9x surge, it means they should lower the prices, which, incidentally they did in London four months ago (also in direct contrast to your case 1).

> If you can raise your price without reducing rides (1), your prices are too low to begin with.

Yes (ignoring the possibility of wanting to discourage long-term competition by keeping margins low), from a profit-maximization perspective, but not necessarily a quantity-of-rides maximization as uber claims.

> only incur the wrath of users by raising the price when it rains? That's really poor marketing.

Some would argue that surge pricing is already poor marketing, given the negative reaction people intuitively have to it

> As long as the relationship is positive, surge pricing works.

No, depends on the elasticity of demand. If demand is unit elastic then an increase in price will result in a equivalent decrease in rides. In order for surge pricing to increase the quantity of rides supplied supply has to be more elastic than demand.

In the Sydney CBD, that's very, very difficult to do. It takes quite a lot of time to get in there due to traffic, and all they are doing is increasing gridlock.

Seriously, I read this elsewhere and it's a lot more believable that people in other corners of the Internet actually think there's a guy with a knob at Uber HQ setting the surge price (I'm being only slightly hypberbolic).

It's a damn sight more disappointing to see this on HN.