A couple of weeks ago I had a meeting with a client in Philadelphia. I was in a time crunch, so instead of driving the 15 minutes into the city, parking blocks away and walking to the meeting, I called an Uber. I made it to the meeting with one minute to spare. The cost for the ride was $16, which is about $9 less than if I had paid the bridge toll and parked in a garage for two hours.
When the meeting was done, it was lunch time and pouring outside. I opened my Uber app to call for a ride home and experienced some serious sticker shock. The cost for the same ride, only in reverse, was $56 — more than three times the price of the first ride. That is a classic example of surge pricing and the economic theory of supply and demand. The demand for Uber services had skyrocketed because of the time of day and the rain, so the cost followed suit.
One London restaurant, Bob Bob Ricard, has implemented what some are referring to as surge pricing. The Chicago Tribune headline says, "Thanks Uber. Now Some Restaurants are Trying Out Surge Pricing." (But it's just one restaurant.) Time's headline reads, "This Fancy Restaurant Just Introduced Surge Pricing."
Here are the details that are causing concern: During off-peak hours, meals (but not beverages) will be offered at a 25-percent discount.
Nothing will cost more than it did before. In fact, the restaurant's owner Leonid Shutov said, "on certain days, it will cost less. It's what we learn in economics 101."
This is not classic surge pricing. This is the classic "early bird special" applied to a fine dining establishment — which most of the articles admit somewhere near the end of the story.
This restaurant is lowering its prices to entice people to come in during slower times, which is a smart business move and a perfect example of supply and demand.
Would it be a smart business move if restaurants implemented true surge pricing during the busiest times? I can't speak for anyone else, but I would most likely pass on a restaurant that charged more on Saturday night than on a Tuesday night — just like I passed on that $56 Uber ride home. I popped up my umbrella, walked five blocks to the train station, took the $2.40 train back to my town, and asked my son to pick me up and drive me home the final mile.