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HI putting a cap on surge pricing for Uber/Lyft

Honolulu lawmakers sent out a bill that really hit Uber and Lyft: limiting how much Uber, Lyft, and other on-demand services can charge during times of high demand. This bill, called Bill 35, targets surge pricing, where ride sharing prices usually sky-rocket. This came about as Navy Sailors were told ride-sharing would cost $224 compared to the usual taxi rate of $44.

This elastic pricing model allows Uber and Lyft to create market clearing prices based on how willing someone is to pay for a ride. 38% of people said that surge pricing is a main motivation in driving during busy times – essentially the price at which someone would be willing to drive.

This concept relates to the notion of matching markets (riders with prices of rides, and drivers with potential earnings). The rider has a value in mind, or the max willing to pay for a ride. During rush hour, folks are more keen to paying for a ride. This price can keep rising until there is an equal amount of riders willing to be driven. While our examples usually have the same number of buyers and sellers, the way Lyft and Uber match people is similar to matching markets. And this bill will have severe impacts on how this market is matched in Hawaii.

Source: http://www.latimes.com/business/technology/la-fi-tn-uber-lyft-price-cap-20180607-story.html

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