Economics: Uber and Surge Pricing, Essay Example

In discussing Uber’s pricing strategy in the context of a supply and demand model, it must be understood that from an economic perspective the company is operating within the boundaries of economic principle, which states that one the demand is high price goes up. A man who did not disclose his name report said that he needed a cab in New York city. I was New Year ’s Eve and the traffic was building up. Normally a cab would cost $13 to get where he wanted to go. However, after about an hour he realized that it was futile trying to stop a cab to get to hi destination. So he resorted to calling Uber. Within 3 minutes a cab was sent and he was billed $50 for the trip some three times the usual price. This is the demand supply strategy used by this company in maximizing profits.

In a sense one could argue that Uber is operating like a monopolist and not a competitive firm. The monopolist principle is demonstrated in being the only cab service that gets one to their destination within the shortest possible time regardless of whether it is peak hours or not. The company has established supply strategies that meet the demands at times when it is greatest. When considering factors impacting both the demand for and the supply of rides during peak and off-peak periods getting to work on time in New York City is crucial many persons could lose their jobs if late. Hence, out of desperation they would call Uber to get them there at whatever cost because losing there is at stake. In this way the company does not compete with any other, but has established its own form of monopoly.