Surge Pricing and Fairness
I think from a law stand point when a product is available to market competition or where competition is asymmetric is the difference when we see packed fruit juices can be priced in a restaurant for 5x price. Essential item like potable water should be available in general for the least price possible but bottled water can be priced at a premium price if it's placed at a service offering like a restaurant, movie hall etc. Public transport provided by Ola, Uber or for that matter all unionised metered taxi operators who operate on-demand are a regulated monopoly in India provided under control of transport ministry. Hence, the transport department can protect public interest by keeping the price cap. The customer in these cases is requesting for the service on-demand and does not have time to get a fair opportunity to negotiate. Just like a electricity board is capped to charge some limited price per unit of electricity.
I guess the planned taxi options like 8-hr planned taxi or 4-hr planned taxis are a fragmented industry, hence are more competitive and more importantly they give an option for the customer to negotiate because they are not urgent. But if you go to tourist places in the hills you will find even those taxis have well negotiated price managed by a union approved by a govt. The intention is the customer should have a fair option to negotiate as much as the service offerer.
The law has a problem if the negotiated option tilts to one side more.
Thanks a lot everyone who read and found time to comment with their views. I think the intent I wanted to bring out here is and example where govt. considers one mode of operation of same kind of services as regulated while other is competitive enough to leave market determine price. Namely, an on-demand cab service vs. a day tour transport package. In fact the easiest form of negotiation can be carried out in the form of contracts btw two legal persons on any subject matter under the sun. But still govt regulates those using certain laws and restrictions under which some of the subjects create definite asymmetry for one of the parties have influence over other. Once classic example is Labour Law. Technically, employer and employees get into an employment contract and it can be customised to any degree as long as it's a meaningful contract under the contract laws. But still there are labour laws in place because historically Govts worldwide have felt employers can get an undue advantage in negotiation due to higher order of influence they have. Without digressing much into that aspect, I just wanted to bring up that on-demand cab service gets some kind of govt. scrutiny as it feels here customer is at the receiving end of the negotiations on an essential service like commute. So it pricing cannot be really be kept to market operators given we do not have enough transport options available in a given time of day at every location. Had entertainment, movies or such be considered essential services by govt. (it can happen in future, lifestyle changes), govt will consider surge pricing there as well. Come to think of it some form of bottled water served onboard of an airline is free. Where there is a surge price on bottled water, there is always a free option available close by which is legally potable.
First off well written irrespective of the viewpoint. There are several examples where demand drives premium pricing. Having said that no one can be the king of the hill for long and disruption should be just around the corner.
Well, compare this with bottled water. I don't think there is any cap there. I mean if you buy a 1L Himalaya water on a street corner shop, they sell it for 12/- whereas the same sells for 15 at a fast-food place and it sells at maybe between 25-45 at a 5star property. So how come that is tolerated by the same society where as premium services and surge pricing in P2P transport is not? At the end of the day, no one is forcing consumers to go for these surge pricing if they find it pricey. They always have an option of other meter taxis,autorickshaws and busses. It's a demand vs. supply equation.. In fact, today even multiplexes have surge pricing (sort of) for weekend box office hit movies and if you compare between theatres, there is absolutely no ceiling nor uniformity .. But people don't mind spending 3x the amount for a weekend show because that's the only time they get to spend with friends and family.. How come no one has any issues with that??