A sold-out concert in Madison Square Garden provides an illustration of the power of surge to equilibrate supply of and demand for rides with Uber. Surge pricing draws more drivers into the area after the concert ends, and causes riders to sort into requesting a ride (or closing the app without requesting a ride) according to their willingness to pay relative to taking an alternative form of transportation. By bringing supply and demand in line, the platform was able to achieve a speedy average wait time of 2.6 minutes. In contrast, during a surge outage on New Year’s Eve, ETAs spiked to 8 minutes and the share of trip requests unfulfilled rose to 25 percent.
Jonathan Hall, Cory Kendrick, Chris Nosko
Economics and Market Design