Surge Pricing: Uber's Dynamic Pricing Explained

Surge Pricing: Uber's Dynamic Pricing Explained

Uber will be activating it's surge pricing feature in Cebu beginning Monday, March 21, 2016. For those who aren't familiar with it, don't freak out yet as I will try to explain here everything you need to know about it. But before anything else, it is important to know what does Uber stands for.

Uber is ALWAYS a reliable ride. Being unavaliable, inconvenient is the opposite of Uber. Being Uber means being "Always On" and "Always Convenient".

This is Uber's differentiator from your regular taxi system. And this is the main reason why they do surge pricing.

What is surge pricing and how does it work?

At times of high demand, the number of drivers becomes limited. As a result, prices are increased to encourage more drivers to become available. Raising prices will dramatically increase the number of cars on the road, therefore, more safe and convenient rides will be served.

For example, if there are 300 cars up in a city and 290 of them are either picking up a rider or in a trip, this would be considered an extremely tight supply situation. Higher prices encourages more drivers to come online. The algorithm raise the price in increments over time until demand begins to decrease. When supply is enough, the price will go down.


How do Uber riders know the price?

Whenever there is surge (or surge pricing), you'll see a notification screen (as below) in your app. You'll have to accept these higher rates before you can proceed with your request.

The math is fairly simple. If your 2-km commute to work takes you 7 minutes, a regular-priced Uber ride would cost you around Php 74.80, as below:

UberX rate in Cebu

Base Fare + (Time Rate * Time) + (Distance Rate * Distance) = Total Fare

40 + (3 * 7) + (6.9 * 2) = Total Fare

Total Fare = Php 74.80

However, if there is 2.0x surge, your trip will now cost Php 149.60.

You can also run a fare estimate right within your app to know roughly what your trip will cost before you request it, so there are never any surprises on your receipt.

Please note that depending on supply/demand conditions, you may begin seeing surge pricing take effect in Cebu beginning Monday, March 21, 2016. 

Questions? Send us an email at ubercebutips@gmail.com.