The attached (below) article is from the blog, Cheap Talk ( http://cheaptalk.org/2015/10/26/prisoners-dilemma-everywhere-surge-pricing-and-the-uber-driver-strike/ ). It describes the affect of Uber’s surge pricing mechanism on efforts of drivers to strike against Uber.
The logic that forces fees up (via surge pricing) fees and induces drivers back on the road in the event of a strike (because demand is not meeting supply) has a geometric symmetry that is elegant, if not more than a little scary.
All pricing mechanisms should work as well (I am not making a moral judgement here) at making sure that both suppliers and consumers get what they want from the market!
Prisoner’s Dilemma Everywhere: Surge Pricing And The Uber Driver Strike
October 26, 2015 in Uncategorized | Tags: teaching
Uber Drivers tried to organize a strike to demand higher pay.
Uber drivers are competing with each for fares. The smaller the number of other drivers on the road, the greater the chance a driver get business. Also, when demand for rides outstrips supply of drivers, Uber might activate surge pricing to increase supply. Not only does a driver stand to get more business, he gets a higher fare/mile. The incentives to deviate from the strike are huge.
So, in Chicago, during the supposed strike, the number of Uber Drivers on the road was huge. Surge pricing was not activated because it was not necessary.
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