Why Dynamic Pricing Is The Way To Go For Ride-Hailing Services | swarajyamag.com

Gone are the days when prices of most commodities were fixed by the government. The introduction of big data has clearly helped many of the conventional organisations to adopt dynamic pricing. As the famous French Physiocrats said long ago, “Market will work for societal good if let alone.”

Dynamic pricing works on the basis of demand and supply and the customer’s ability to pay the price. This is the “practice of pricing items at a level determined by a particular customer’s perceived ability to pay”. In the Indian context, dynamic pricing in transport can be seen at work popularly in app-based ride-hailing services like Uber and Ola, and fares of airlines and the railways.

If you notice airline prices rise during Deepavali or Durga Puja, it’s generally because of an algorithm that detects a hike in incoming requests for those particular airways, the time and the location. In economic terms, this is called “price optimisation” or the determination of fare based on real-time demand.

App-based cabs like Uber use dynamic pricing. Many a time, due to mismatch between supply and demand, dynamic prices have to be invoked. This makes sure, in the case of cabs, for instance, that passengers can always get a ride when they need it. Otherwise who would have thought of operating cabs and taxis at midnight or even 24×7?

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Why Dynamic Pricing Is The Way To Go For Ride-Hailing Services.