Surge pricing, the scourge of ridehailing, is evolving for the robotaxi era
It’s a familiar frustration for ridehail users: you open the Uber or Lyft app, enter your destination, and discover that your intended trip costs several times more than expected. The culprit is surge pricing, one of ridehail’s most important and controversial innovations. Customers grumble about higher fares, but Uber and Lyft executives have insisted that surge pricing benefits them by attracting additional drivers, which allows the companies to fulfill more trips and reduce wait times.
That justification makes intuitive sense, but it raises an awkward question about robotaxis, which are expanding across the US, from San Jose, California, to Washington, DC. If surge pricing is intended to expand the driver pool, why is it now being used by companies with driverless vehicles?
Waymo, which offers robotaxi trips in the Bay Area, Los Angeles, and Phoenix, charges surge pricing during peak times, as did Cruise, its now-defunct competitor. Assuming a robotaxi fleet is already fully deployed, higher fares cannot expand vehicle supply in the way they could for Uber or Lyft. Instead, riders simply need to pay extra, assuming they can afford to, or search for another way to travel.
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