EDITORIAL: Ride hailing works better with ‘surge’ pricing
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No one wants to walk out of a concert far from home and discover that the cost of a ride home could run to hundreds of dollars because everybody else is looking for a ride, too.
But a solution to the problem proposed by a Chicago alderman, to put a cap on “surge” pricing by ride-hailing services like Uber and Lyft, is silly.
It demonstrates zero understanding of how the free market works, fairly so, and will only backfire.
Ald. Anthony Beale (9th), chairman of the City Council Transportation Committee, accused Uber and Lyft of predatory pricing after a CTA service disruption last month on the Red, Brown and Purple lines drove up the costs of rides more than sevenfold, reportedly to as much as $100, though Lyft and Uber refunded the surcharges later. Beale wants to cap surge pricing at 150 percent above the average regular fare set during the preceding seven days.
That might sound consumer-friendly, but it’s not. Surge pricing, in which the cost of a Lyft or Uber ride can soar along with demand, lures more part-time drivers out onto the streets to provide rides that otherwise wouldn’t be there. What good is capping the cost of a ride if it means that ride won’t be there when you need it?
Ride-hailing companies should be permitted to set up their business model as they wish, which isn’t to say there isn’t room for improvement. Now, Lyft and Uber notify drivers in advance of times when they expect demand to peak. They could do a better job of notifying riders as well, so no one gets sticker shock when it’s time to go home.
As part of his proposed reform, Beale also is pushing a requirement that drivers for ride-hailing services be fingerprinted. We don’t know if that’s a good idea or not, and neither does Beale. There are legitimate safety issues. But it would drive up costs, and there’s no such thing as a free lunch or, rather, a free ride. Beale might want to wait for the results of a study on the topic being conducted by the Department of Business Affairs and Consumer Protection.
Ride hailing is a relatively new service, but one that’s already ingrained in city life. No one wants to go back to the days of desperately scanning the horizon for the only available cab.
Surge pricing is not unfair. It’s business. We’re all free to take it or leave it.
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