Uber Gives A Lesson On Economics 101 To Karnataka Government’s Curb Over Surge Pricing

“It’s a bit of economics 101: supply and demand adjust in response to price changes. Surge pricing is not unique to us–airlines, hotels use the same pricing principles to match demand and supply”, says Uber.

Just days after Transport department of Karnataka cracked a whip on surge pricing by taxi aggregators, Uber has on Wednesday stated an objection to the new rules laid out by Karnataka government.

Transport department had said that fares and other charges could not be higher than the fare fixed by the government and the apps could only charge within a band the upper limit of which is capped.

However, Uber is not pleased by the new rules and has shown apprehension towards government’s move.

“Our goal at Uber is to ensure you can push a button and get a ride within minutes — even on the busiest nights of the year. And due to surge pricing, that’s almost always possible,” Uber said in their statement.

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In Surge pricing fare rates automatically increase, when the taxi demand is higher than drivers around you.

“It’s a bit of economics 101: supply and demand adjust in response to price changes. Surge pricing is not unique to us–airlines, hotels use the same pricing principles to match demand and supply.Nearly all surge profits go directly to drivers as part of their fares. As a result, the number of people wanting a ride and the number of available drivers come closer together, bringing wait times back down,” Uber.

With other states also replicating Karnataka’s move, will it be an area which government failed to understand, misdirected policies or will it be beneficial for the whole system and lay a strong foundation for taxi businesses in the future?

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