All You Need to Know About Ola, Uber Surge Pricing in 5 Points

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hindustantimes.com

All you need to know about Ola, Uber surge pricing in 5 points

Sunny Sen, New Delhi

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Updated: Apr 20, 2016 18:14 IST

Taxi aggregator service Uber has been operating in India for almost

two years without anyone bothering about ‘surge pricing’ -- where

cab fares multiple with rising demand.

Taxi aggregator service Uber has been operating in India for almost

two years without anyone bothering about ‘surge pricing’ -- where

cab fares multiple with rising demand.

you need to know about Ola, Uber surge pricing in 5 points about:reader?url=http://www.hindustantimes.com/delhi/delhi-odd-even...

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But the controversial model hit the headlines during the ongoing

second phase of the odd-even scheme in Delhi, when fares on Ola

and Uber went by up to five times the usual price due to high

demand.

The ensuing outcry led the Arvind Kejriwal-led Delhi government to

ban surge pricing, a move that upsets the business model of cab

aggregators.

What is surge pricing?

Prices or fares of taxis surge when the demand exceeds the supply.

This means, the number of people requesting for cabs is more than

the number of cabs available in the city. The surge happens on the

base fare fixed by cab aggregators.

Read: Ola, Uber’s surge pricing under government radar

How does it work for cab aggregation apps?

Cab aggregators such as Ola Cabs and Uber create algorithms that

calculate the number of requests at any given point, and equate it

with the number of cabs available. The process and fares are

dynamic. The higher the demand, the higher the surge, at times ashigh as four times the base fare.

When prices surge, cab drivers clock higher fares. A portion of this

goes to the cab aggregators. For example, Uber takes 20% of total

fare. The higher the surge, Uber makes more commission. Surge

also helps in prioritising travel. A person who needs to go for a

meeting or reach the airport takes the cab at the surged price, but

anyone who wants to go out for shopping waits till the surge ends.


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How are prices calculated during a surge: who calculates it,

does the driver have a role ?

The mechanism of calculating surge prices is similar to ticket prices

in airlines – cost of travelling drops or increases closer to the dateof travel and on occupancy. It’s dynamic.

Uber and Ola Cabs use proprietary software and algorithm to

calculate demand and supply, and it happens by the minute. Cab

aggregators do not have control over supply, but according to some

company officials, surge helps in getting idle capacity out on the

roads.

What happens once surge prices come into effect?

Once, the surge happens drivers are who are at home also come

out – it’s like a bait to earn more. That helps in increasing supply

and bringing down the surge. Surge helps in maintaining

equilibrium, the companies say.

Read: Uber, Ola suspend surge pricing after Delhi govt threat

Why is Arvind Kejriwal against i t?

Kejriwal mentioned in his tweet that cab aggregating companies

who refuse to operate without surge are blackmailing commuters

and the government won’t allow it. Surge is equal to looting

Delhizens, said Kejriwal. A ban was introduced for the period of the

odd-even scheme. However, on Wednesday, the Delhi government

said that the ban on surge will be permanent, and not restricted to

the 15 days of the road-rationing scheme.


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Read: Surge pricing is daylight robbery, won’t allow it: Kejriwal


4 20 04 2016 06 32 PM

All You Need to Know About Ola, Uber Surge Pricing in 5 Points

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