Dynamic Pricing of taxicab fares and fairness

An article in the New York Times (Jan 9,2012)  describes taxi pricing at Uber, a company that charged $27 per mile at the start of New Year’s Eve and $135 per mile late night.  Prices were revealed at the wnd of the ride, and charged automatically to credit cards.The company claims dynamic pricing as the reason, with the supply of taxicabs in the region being low relative to demand, and price enabling the market to clear. Is this approach to dynamic pricing reasonable or does it violate an implicit contract regarding ricing stability ? Is the timing of fare revelation i.e., start vs the end a factor in terminng fairness ? Do you expect such pricing schemes to decrease average prices while increasing temporal variability of prices ?

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About aviyer2010

Professor
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