Regarding surge pricing in Uber like operations, we tried out an open ended exercise in class. We defined lock-in prices as options to be purchased by both passengers and drivers (guaranteed upper bound for passengers and guaranteed lower bounds for drivers, with a small non-refundable premium) and tried to think through whether this gives more information on the local supply demand gap that could occur and also the willingness to pay/willingness to supply at some price through these options. In principle, this should help in setting appropriate prices and also advance information for increasing supply and adjusting demand, wherever possible. Could not think through all of it, but it was interesting, and one more way of being 'transparent' about surge pricing.
Loved the article. I just finished teaching the revenue management module in my Healthcare and Service Operations class, so I shared this with my class.
On the social norms front, I always find it interesting that they vary so much by culture. Separate pricing for lunch menus was such a weird thing to me when I first came to the US.
Love these newsletters and the topic of dynamic pricing is so interesting and so relevant in these times. Free market proponents will vouch for it but the question that pops into my head is around class warfare. Does this lead to societal imbalance and further strain relations between the haves and have nots
Thanks, Lohit! That's indeed an important, weighty topic that I hope to write as we go. Redlining itself emerged from the discrimination in processing government household loans, using geographic zone maps.
It’s an interesting conversation was it racial discrimination or division by classes. Unfortunately historically economic success was closely tied to race but don’t you feel that is changing ? As the country gets more diverse and there is a remake of societal classes I wonder if that becomes more apparent.. the system divides people based on socio economic status which is just a con of capitalism America has subscribed to?
The more philosophical question I keep going to - isn’t that just the free market at play? Why is it bad if there is a willing seller and a willing buyer. If we are all pro free market ?
Regarding surge pricing in Uber like operations, we tried out an open ended exercise in class. We defined lock-in prices as options to be purchased by both passengers and drivers (guaranteed upper bound for passengers and guaranteed lower bounds for drivers, with a small non-refundable premium) and tried to think through whether this gives more information on the local supply demand gap that could occur and also the willingness to pay/willingness to supply at some price through these options. In principle, this should help in setting appropriate prices and also advance information for increasing supply and adjusting demand, wherever possible. Could not think through all of it, but it was interesting, and one more way of being 'transparent' about surge pricing.
Love this exercise! Curious what kind of convergences you found.
Loved the article. I just finished teaching the revenue management module in my Healthcare and Service Operations class, so I shared this with my class.
On the social norms front, I always find it interesting that they vary so much by culture. Separate pricing for lunch menus was such a weird thing to me when I first came to the US.
Thank you for generously sharing with the class. Absolutely agree on the pricing norms and culture (e.g. tipping norms)!
Love these newsletters and the topic of dynamic pricing is so interesting and so relevant in these times. Free market proponents will vouch for it but the question that pops into my head is around class warfare. Does this lead to societal imbalance and further strain relations between the haves and have nots
Thanks, Lohit! That's indeed an important, weighty topic that I hope to write as we go. Redlining itself emerged from the discrimination in processing government household loans, using geographic zone maps.
https://www.nytimes.com/2021/08/17/realestate/what-is-redlining.html
It’s an interesting conversation was it racial discrimination or division by classes. Unfortunately historically economic success was closely tied to race but don’t you feel that is changing ? As the country gets more diverse and there is a remake of societal classes I wonder if that becomes more apparent.. the system divides people based on socio economic status which is just a con of capitalism America has subscribed to?
I am still trying to learn how things have changed in society respect to race/class, but there is income effect in responses to dynamic pricing.
The more philosophical question I keep going to - isn’t that just the free market at play? Why is it bad if there is a willing seller and a willing buyer. If we are all pro free market ?