Kaitlin Daniels

 

Faculty Candidate Kaitlin Daniels [The Wharton School of Business]
Title The Role of Surge Pricing on a Service Platform with Self-Scheduling Capacity
Date & Time Wednesday, January 13, 2016 at 10:30am
Place UCLA Anderson School of Management 
Room D-310 

 

Abstract
Recent platforms, like Uber and Lyft, offer service to consumers via "self-scheduling" providers who decide for themselves how often to work. These platforms may charge consumers prices and pay providers wages that both adjust based on prevailing demand conditions. For example, Uber uses a "surge pricing" policy, which pays providers a fixed commission of its dynamic price. Relative to a contract with a fixed price and fixed wage, we find that the optimal contract substantially increases the platform's profit, and, though not optimal, surge pricing achieves nearly optimal profit. Despite its merits for the platform, surge pricing has been criticized in the press and has garnered the attention of regulators due to concerns for the welfare of providers and consumers. While we find that providers and consumers are always harmed if the platform uses only a dynamic price (with a fixed wage), they are generally better off with the combination of dynamic prices and dynamic wages. We conclude, in contrast to popular criticism, that all stakeholders can benefit from the use of surge pricing on a platform with self-scheduling capacity.

Kaitlin Daniels