One of the key innovations of ride-hailing apps has been that their pricing is sensitive to demand: that is, prices go up as there are more customers demanding rides. Uber calls this surge pricing, whcih is such strong branding that people have started to call similar demand-sensitive pricing programs at other companies by the same term. Lyft calls it Prime Time, and did away with previously-announced caps on price hikes in February, but forgot to notify passengers.
The change wasn’t a secret, either. The company published a blog post about the situation at the time, which Engadget recently pointed out to the rest of us passengers.
Co-founder John Zimmer explained why Lyft tends to adjust prices when its main competitor, Uber, does. “Even with better service, passengers first choose the more affordable option,” he wrote. “When price is similar, more and more are choosing Lyft because of you.”
While many drivers work for both services and simply accept the first hail that they receive, it turns out that passengers are comparison shopping in a similar way, picking the service with the lowest fare for where they’re going.
When Lyft introduced Prime Time, it promised to cap the price hikes at 200% (auto-play video at that link) and lifted that cap in February, noting that in emergencies, like a natural disaster or major sporting event, they will still cap the price. That helps avoid PR disasters.
Standing Together: Community Update From John [Lyft]
Lyft nixed its surge cap and didn’t tell riders [Engadget]
by Laura Northrup via Consumerist
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