The value of every commodity is determined by its supply and demand. The supply and demand of commodities also vary over time because of several factors. Businesses strive to make adjustments to maximize the fluctuations in the demand and supply of their products. Uber Surge is a pricing method used by Uber to vary the value of its services due to demand and supply.
Uber is a ridesharing app with which riders can order rides and pay fares according to the length of the ride. With Uber Surge, other factors such as the availability of riders are considered in determining fares.
How Uber Surge works
During specific times of the day and periods of the year, the demand for Uber rides is higher. The higher demand can also be unexpected, maybe because of a storm or some other factor. The Surge feature calculates the relative proportion of the demand to supply and establishes a multiplier which is then applied to the fares. The Uber Surge algorithm thus tries to balance out demand with supply, increasing the value of rides because of the increased demand.
For example, if there are 15 requests for rides for a specific area and only two drivers in the area, the Surge algorithm establishes a multiplier and then uniforms the riders of the new price due to the increased demand. If a rider doesn’t mind the increased fare, they can go ahead and demand the ride.
As established by research, it is important to note that these price surges are dynamic and can change within a short period. One study showed that the price of rides to a destination doubled and came back to the normal fare within six minutes.
According to Uber, the Uber Surge feature was established to attract drivers to an area with a lot of requests and even out the demand with supply. Drivers get notifications of Surge areas and the increased fares which attracts them to the area. When more drivers are attracted to the area, the fares get reduced and all requests are met.
What Uber Surge means for riders and drivers
For drivers, the Uber Surge feature means that their days can be more productive, especially if strategically planned around surges. Drivers also have to be more proactive because of the highly flexible nature of the surges.
For riders, the Uber Surge feature means that the cost of Uber rides cannot be generally predicted. The cost-effective and convenient nature of Uber rides made them a favourite choice. Riders may need to always budget some extra funds for rides during surges.
During surges, one may also consider waiting the surge out, although the unpredictable nature of the surges makes that an unideal option.
The introduction of Uber Surge has generated mixed reactions by both drivers and riders. Riders are now aware that the prices of their rides can change any moment, and drivers experience a bit of concern about the fact that riders may become uninterested in their services because of the higher prices during surge periods.