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Uber: Jacking up taxi fares for the common good


March 4, 2014

The Uber taxi app for iPhone and Android.

The Uber taxi app for iPhone and Android.

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Paying two, three or even ten times as much as usual for a taxi ride across town sounds like a pretty crappy deal, right? But I’m sure you can imagine times when you’d be happy to pay it – times, for example, when demand is so high that it’s impossible to get a ride. And that’s the theory behind Uber, a mobile app that’s aiming to use basic economic theory to eliminate taxi bottlenecks. And as it turns out, it just might end up being better for everyone.

On the face of it, the Uber app is a nice, clean, slick taxi app for Android and iPhone. You sign up with an email address, phone number and your credit card details – a nice detail which makes the whole process cashless.

When you need a cab, you open up the app and are instantly shown your own location plus location icons for all available cars, and an estimate of how quickly one can get to you. You enter your destination and get yourself an instant quote on the price, then hit a button to kick the process off. Nice implementation of a fairly standard process, really.

Where it gets interesting is when “surge pricing” kicks in. If demand is really high in a particular area, Uber starts putting a price multiplier on all fares in that area. This acts like a honeypot for the drivers, who take home the same percentage of any fare they get. The area gets an influx of cars, and hopefully the surge dies down.

In theory, it’s good for everyone. It gives an extra incentive for drivers to work peak times when they might not otherwise want to get out of bed. It draws more cars to where they’re needed most. If you’ve got the cash and you’re happy to pay the surge rate, it makes sure cars are available to you when they might not be otherwise. And if you don’t have the cash to fork out extra, at least it takes the richer or more desperate people out of the cab rank in front of you.

Uber does its best to make it very obvious when you’re paying surge pricing, including making you actually type in the surge rate if it gets too high. The company only wants to charge those rates to people who really want to pay them.

And in that way, Uber is an excellent example of basic economic theory in action. When demand is high, the prices go up, suppliers flood the market and the price stabilizes when supply meets demand. Uber doesn’t replace the regular city cab options, but works alongside them, and becomes a premium service in busy times.

And that ought to be good for everyone!

Uber is available in more than 70 cities around the world.

About the Author
Loz Blain Loz has been one of Gizmag's most versatile contributors since 2007. Joining the team as a motorcycle specialist, he has since covered everything from medical and military technology to aeronautics, music gear and historical artefacts. Since 2010 he's branched out into photography, video and audio production, and he remains the only Gizmag contributor willing to put his name to a sex toy review. A singer by night, he's often on the road with his a cappella band Suade. All articles by Loz Blain

The only problem is that many of the drivr are not insured professional driver. Just check the internet to see how bad it could go; mostly for the driver or the other side oft the accident as passenger are covered by Uber insurance. In some country it is even illegal (two cars were seized yesterday in Brussel) as Uber don't care of the legislation.

This article sounded more like an advertisment and not the kind of information I am used off frome this web site.


You did not mention that riders take their lives in their own hands literally. To my understanding. Uber does not do background checks, Uber does not have insurance that covers the cars, and their contracts spell this out. Also Uber does not register their cars with the local taxi authority and comply with the laws there. So if there is a crime it is harder to locate that car involved. Ok, if you are a criminal. Not OK if you want to feel secure. Uber does not pay taxes to the local taxi authority or get permits. How is this better for everyone?


I would use this. The only time I take a cab is if its important to do so and so would be willing to pay more.

Rann Xeroxx

It is not good for the professional taxi drivers that had to get a special license and now it without work, or for the people the unprofessional drivers that run down pedestrians.

Nelson Chick

@Nelson Hyde Chick, yeah right, everyone driving without being a professional is going to run people down.

I think the system is for professional drivers anyway.

This system provides a lot of incentive for drivers to collude to drive up prices. They can stay in the same area relaxing, having a doughnut, while riders get ever more desperate for a ride. Then take turns getting a big fare.

Rich people served...everyone else...like little old ladies...Go! Walk a mile to a trolly station, bus station or whatever. That means it does the exact opposite of what is claimed. Barter, auctions, slimy sales people, kill an economy, and promote deception, greed, and bass ethics. Same price for everyone, transparent pricing, many competitors, low barriers to entry, that makes for an efficient healthy economy and more decent people.


This is nothing but price gouging. Plain and simple.

Abu Baqibillah

"And if you don’t have the cash to fork out extra," you have even less chance of getting a cab.

Gregg Eshelman

well done. Nice socially just idea.


This is a showdown between two approaches.

On the one hand we have the regulatory approach, with fixed prices, closed-shop licensing and an oligopoly of well-connected, heavily regulated fleets. On the other hand we have unregulated free-for-all competition, with market-driven prices and supply.

It is obvious the first option will win: the fleets will lobby the local government to regulate away the system that allows price competition, and the lawmakers will happily comply. The Uber system has no future.

@Nelson Hyde Chick: I do not understand. Why would unprofessional drivers be able to make money under a free competition system, but professional drivers be out of work? Is it somehow financially advantageous to run down pedestrians? Please explain.

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