Pricing
The Surge Pricing algorithm is a cornerstone of Uber’s business model that has provided the company with an information edge in capitalizing on the dynamic relationship between supply and demand and willingness to pay. When there are more passengers than available drivers in a given area, the algorithm increases rates in order to equilibrate this discrepancy. The first benefit of this model is that it attracts drivers to areas offering higher rates, thus increasing their numbers in regions of high demand. Second, it narrows the initial pool of potential passengers based on how much they value a ride, allowing Uber to more accurately segment their customer base and satisfy those users who need their service the most. This creates a stronger brand image because customers will associate Uber with getting where they need to go in the times when convenience and speed were most important. Thus the Surge Pricing model serves the purpose of capturing the highest possible margins for the company while establishing a targeted base of loyal users and a positive brand perception