The surge of interest in dynamic pricing among taxi operators is a natural response to the growing competition from private-hire cars. Transport network companies based on technology, like Uber and Grab, have changed the game by taking cheaper fares during off-peak hours and higher fares when demand exceeds supply, for example during the rush hour. Established players feel disruptors are eating their lunch, while commuters are happy there are more choices on the menu.
The reason competitors appear on the transport scene is simply that supply cannot match demand at certain times and locations. Ride-hailing apps, however, neatly solve that perennial issue by matching users and drivers efficiently. Consequently, one shouldn’t take hasty action to deter innovation. Some senators in the Philippines, however, want to ban dynamic pricing or cap it because of overcharging during peak periods and the holiday season. Exorbitant pricing has been reported elsewhere too, notably during emergencies – like the hostage crisis in Sydney and Hurricane Sandy in New York City.
Cab operators who believe two can play at that game and regulators must think through the implications of a laissez-faire approach. Dynamic pricing was indeed the model of the pirate taxis of old and tourists once complained about price gouging.
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