Pricing Car Service in Real-Time

By Deane Barker on January 14, 2012

Disruptions: Taxi Supply and Demand, Priced by the Mile: Much like Los Angeles’ ExpressPark experiment, a company called Uber is using technology to dynamically price car service in New York according to supply-and-demand.

However, the murky variance of rates is causing people some distress – this article tells the story of a guy that paid $27 to go on a one-mile ride, and $135 to take the same trip back, due solely to the demand for cars when he returned.

“With regular day-to-day decisions, consumers like predictability and don’t like to see prices change,” said Dirk Bergemann, a professor of economics at Yale. “People are trained that there is a level of predictability with purchases. There will be a regular price for a bottle of ketchup and a relatively average price for a taxi.”

Professor Bergemann said that as technology continually made it easier for companies to change prices in real time, businesses would try to do so. He said, however, that companies would have to be prepared for repercussions.

Another example of technology being a general disruptor.

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