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 Unlimited Free Ride facility with Offers on Rides.
 Easily available, with just 1 click on the phone.
 Easy One-Touch Payment with Online Cash.
 Estimate Ride Cost before travelling.
 Belongings left over can be restored by tracking the car number.
 Safe and well behaved cab drivers with ID proofs.

 During periods of excessive demand or limited supply, UBER increases its
normal fares with a multiplier whose value depends on scarcity of available
drivers, it is called “Surge-Price”.
 At the time of pick up, demand is increased but supply of cab does not
increased in same rate, thus Shortage occurs.
 The goal of surge pricing is to find the “equilibrium price” at which driver
supply matches rider demand and riders’ wait time is minimized.

 These factors lead to rider dissatisfaction.
 Fixing these problems is also possible.
There’s Always a Solution . . .

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Scenario

 Price ceiling is a tool of rent control.
 Price can fall below the selected price but not allowed to rise above it.
 In this case, Government of Karnataka set a price ceiling up to 5x, which
means UBER can charge maximum of five times more than usual price at the
time of high demand.

 This is an Oligopoly market structure.
 All the cab services have large number of market share as UBER gives low in
price but good in quality services. But they differentiate on the surge price.
Economic profit persists only in the long-run.

As a economical view “Cost & Benefit” lies on surge price.
 It reduces wait time for the passenger. Time is an important factor in micro
economics.
 It provides certainty about getting the services.
 It gives priority to rider who really need the service.

 In UBER service riders have an opportunity cost.
 In market, prepaid taxi or OLA is a substitute option for the passenger.
 So those people who take UBER instead of prepaid taxi and OLA they have
an opportunity cost, whose value is equal to the prepaid taxi or OLA fare.

 Suppose in market, OLA has no price cap and they are charging 7Y surge
price, that means seven times than the normal fare but, UBER is charging 5Y
surge price due to their price cap implemented by Karnataka government.
As UBERs’ price is less than OLA at high demand situation so people are more
likely to take UBER that is why demand of UBER will increase 1.2X. That means
demand is increased by 1.2 times.
So the cross price elasticity is :
which is relatively inelastic.
 Initial price(OLA) =100 & initial
quantity(UBER) =100.
Range of cross price elasticity is positive
for the substitute product.

 In oligopoly there are small number of company but with large market share,
so they try to manipulate the market.
UBER’s surge pricing offers a good example of how technology and
economics have combined to create a sophisticated pricing approach but
without adequately bringing customers into the equation.
After all, it is riders who choose UBER over a taxicab or a bus, experience the
service, and pay the asking price. So it is vital that their assessment of the
approach be considered carefully.
The right to equality government follow this rule so they put price ceiling on
the surge price. This turns up beneficial for the riders.

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