Halloween Can Teach You About Incentives

On any given day, ridesharing companies face the logistical puzzle of balancing supply and demand. As they strive to match the number of cars on the road with the number of passengers seeking rides, they rely on computer algorithms to guide drivers and keep customers updated in real time. But on a busy night such as Halloween, the balance becomes even more challenging to maintain.

Yes, Halloween is one of the busiest nights for ridesharing. And, of course, there’s New Year’s Eve, when demand skyrockets, as well as times when it spikes in a particular market, such as Mardi Gras in New Orleans, St. Patrick’s Day (for cities such as Chicago that are serious about their pub crawls) and even smaller occasions such as sporting events, concerts or conferences.

Like New Year’s, universality defines Halloween. Drivers aren’t necessarily directed to a certain part of town, because people could be celebrating anywhere. This creates not only a challenge for the companies, but also an opportunity. It requires a few tricks to wrangle contractors and make sure everyone gets their treat: Drivers get paid, customers get efficient rides and the company profits.

The fact that ridesharing services dispatch fleets of contractors, rather than employees, is what makes all of this so complicated. Simply put, the companies can’t tell drivers, “You have to work.” They can suggest it, but they can’t mandate it. This is the wrinkle that an increasing number of companies will navigate as technology fosters the continued expansion of the gig economy and remote workforces become more common.

No one can anticipate exactly how many drivers will be on the roads on Halloween or other busy nights. Even the most prominent ridesharing companies have been around for less than a decade, so they have minimal historical data upon which to draw. That’s why the economically savvy strategies that they have developed to bolster supply will be in full force on this Halloween.

Predicted dynamic pricing

Chances are, you’ve been on the receiving end of dynamic pricing as a rider. Uber calls it surge pricing. Lyft calls it Prime Time. During periods of high demand, ride prices increase.

“Halloween is one of the busiest nights of the year for Lyft,” a Lyft spokesperson said in an email statement to Entrepreneur. “Because of the high level of the demand, passengers may encounter Prime Time prices, but we will do everything we can to ensure that there are enough drivers on the road to keep rides affordable for everyone.”

Dynamic pricing frustrates many customers, which is what ridesharing platform Gett banks on.

“We will offer surge-free fares on Oct. 31 and throughout Halloween weekend, just like we do on every other day of the year,” said Gett CMO Nahshon Davidai in an email statement. “Gett is completely transparent about pricing and offers firm quotes based on the estimated time and distance of the ride. As a result, customers won’t need to worry about increased fares due to higher demand on Halloween.”

Davidai also noted that for 50 select “peak” hours each week, Gett pays its drivers 1.2 times their regular pay, and the company takes 10 percent commission from drivers and allows them to accept and keep all of their tips. The company did not specify whether it has any plans for Halloween in terms of driver pay or incentives.

(Uber declined to share information with Entrepreneur regarding its strategies for managing supply and demand on Halloween. Other ridesharing companies Via and Juno did not respond in time for this story’s publication.)

Yet dynamic pricing is core to how many ridesharing platforms operate, regardless of how customers may feel about it. It’s not meant for price gouging — it’s a way to limit demand.

“It’s a losing battle to stick to a ‘we’re against surge’ message, though it may appeal to certain customers,” says Arun Sundararajan, professor of information, operations and management Sciences at New York University’s Stern School of Business and author of The Sharing Economy.  “It’s certainly one of the innovations that was necessary. You could never get a taxi during rush hour five years ago.”

Sundararajan explains that airline ticket prices fluctuate constantly, but customers have grown to accept the fact that the person sitting next to them on a flight may have paid a much lower price for his or her trip. He expects that surge pricing will become more a part of the landscape. “I don’t think this is the best branding choice to call it surge pricing,” he says. “Airlines don’t call it anything.”