The uber problem of letting economists set your prices.

There’s this service called Uber that’s been getting pretty popular in parts of the States, and has seen a bit controversial lately. It’s an app that connects people who want priceyish cab rides on demand, with people who drive said cabs – though not the regulated city kind – and all through the instant magic of cell phone technology. Crucially, Uber takes it upon itself to set the prices, and therein lies the rub: those prices are set by economist types, and not by marketer types. So they do things that make sense to economists, like raising the price when its algorithm detects more demand – like, say, in a snow storm. Lo, people got upset and protested when this happened, leaving the economists scratching their pointy little heads.

To an economist this is just supply and demand working like they are supposed to. If more people want cabs at once, then you put the price up, and some people will decide to travel another way (or not at all), while the people who REALLY need to get somewhere will still pony up, and the extra premium will persuade an extra few cabbies to get off their couches and dice the ice. If airlines can charge more at Christmas without people complaining, then why all the fuss about doing the exact same thing with cabs in the snow?

But marketers have to get intimate with how they actually think, not just how a computer would expect them to think. And if there is one thing that people need, it is a sense of control over their lives. We can cope with matinee shows being cheaper in the middle of the day, because it is a predictable element of our leisure lives. When we look for holiday flights, we might be annoyed that it is more expensive at Christmas, but we can plan around it. But when we are stuck in a snow storm, we find our normal options are limited, and so we get worried and frustrated. If the options that we fall back on work, then we feel good that we pulled one of. But when those options suddenly spike in price, just when we need them most, then we start to feel constrained and threatened. And then we feel angry and righteous, because what kind of depraved jerk milks anguish for profit? And those are the types of emotions that lead to angry letters, or worse.

But shh, don’t tell the economists. It’s cute watching them try to come up with different categories of goods that relate to a psychology idea they saw in a TED talk 🙂


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