Business, 23.04.2021 16:30 smancilla2020

We are reviewing our Uber surge pricing strategy and we are thinking about enacting a bar-district surge price. We have studied demand characterizes of rides in major cities with well-known bar districts. Furthermore, our data analytics team has estimated the inverse demand P1(Q1) for rides to bar districts before 2am and the inverse demand P2(Q2) for rides from bar districts after 2am, as follows: Group 1: rides to bar districts before 2am: P1(Q1) = 5 – 0.01Q1
Group 2: rides from bar district after 2am: P2(Q2) = 10 – 0.01Q2

First, note that these price functions are in per mile terms. Also, keep in mind that our marginal costs per mile driven is $1. Please review optimal prices to charge to each group (using 3rd degree price discrimination) and let me know what the resulting profits would be. I am curious to see how much higher the "after 2am" bar-district surge price could go.

Also, in your review of customizing a higher price to people leaving bar-districts after 2am, let me know if you spot any legal/ethical risks. We have a good partnership with Mothers Against Drunk Driving (MADD), so I want to think about all the risks of this bar-district surge price.

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