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Optimality of pricing high when there is an excess demand

This nit complains that Uber charged him a 3.6X multiple of the ordinary taxi fare during a period of high demand – namely Melbourne Cup day.  The alternative was for the usual flat fare to be charged and therefore for the excess demand to remain unmet on this day with some punters in urgent need of a taxi consequently being left stranded at Flemington.

Charging a high fare means that only those with the most crucial need for a taxi ride will use the service – others may take public transport perhaps with a walk.  It also means there are maximum incentives for taxi drivers to be out on the road driving on this day when most of us are taking the day off.

The fare wasn’t sprung on the nit.  He agreed to pay the large fare without checking what it was.  After getting the bill he has launched into an attack on Uber.

OK it isn’t perhaps an issue of nation-shattering significance but the lousy journalism at The Age is an issue of consequence.  The journalists here have no knowledge of the most basic economics and push an anti-markets viewpoint that makes us all worse off.

The same stupidity ranges into a whole range of other fields – popular community opposition to “scarcity pricing” of water is an example.  How outrageous to price water that is in short supply more highly! How outrageous to encourage care in use and in creating new sources of supply!


3 comments to Optimality of pricing high when there is an excess demand

  • Tom Davies

    I suspect that ‘Uber ripoff’ will become a staple of lazy journalists — here’s another from last NYE, where the customer seems oblivious that she was using Uber Black, not Uber X.

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  • david

    Its all a matter of economics – and under this buget emergency we cant afford luxuries like subsidising the likes of UBER.

    Its time for Turnbull to bring the country into multi-billion dollar surplus IN A SINGLE YEAR. This government need to grow a pair and bring in the following as a matter of URGENCY / EMERGENCY:

    1. Flat Tax on EVERYONE – 49% from first dollar earned.
    2. Scrap Dole entirely and Disability Pensions
    3. reduce Aged Pension to $100 per fortnight PER PERSON – means tested to include family home.
    4. Scrap ALL foreign aid.
    5.Sell off Aussie Army/Navy – keep Air Force.
    6. Increase GST to 40% on all purchases including food, education, internet purchases, firearms etc
    7. Tax Gay Marriage at higher rate to hetero and only available in certain states after referendum
    8. Privatise ALL Schools – let market decide rates
    9. Sell Medicare to private hospitals, doctors. drug companies etc
    10. Abolish States and Councils
    11. Abolish Workplace Laws – Health & Safety, Unionism, dissmissal rules etc
    12. Abolish Family Trusts except for farmers
    13. Abolish all industry support, CSIRO, ABC and Tourism Board
    14. Abolish all anti-freedom laws including defamation, racial abuse, sexual equality etc holding back our democracy
    15. Limit access for foreigners as tourists unless sign release form, also no foreigners can buy or own property or businesses without public vote on it

    Unless we do this we are forcing our children and their children etc to pay back million trillions of debt that nobody even knows about and it keeps creeping up.

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