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All taxi drivers, even without the help of systems, know that in the places of various concerts and festivals, there is always a larger number of taxis. Nevertheless, the possibility of earning an additional tariff can motivate drivers to forecast high-demand places and prepare for an influx of customers. Surprisingly, the fact is that the more Uber will use the price surge algorithm, the less it will need it. “ Proactive” tactics of drivers and miscalculation of places of potential excitement will help to eliminate the imbalance of demand, which causes the need for higher prices. Our group decided that it would be interesting from microeconomics point of view to model “ surge pricing situation” on demand and supply curves. Surge pricing modellingWhen demand on Uber taxi is regular, price remains the same for everyone. But during time when demand increases and the availability of drivers is less than the number of riders trying to place an order, surge pricing algorithm, employed by Uber in order to equilibrate supply and demand, takes place.

According to this algorithm, multiple is assigned to the order and it derives “ surge price”, multiplying the standard fare. PolinaLet’s imagine a regular weekday. When the market situation is stable, supply and demand are at the normal level. Uber customer is able to open the app and get taxi at any given point at a time for an affordable price. Graph 1 below shows market equilibrium during period of regular price and regular demand on Uber.

As a result, time, money, and effort needed to facilitate the deal between customer and driver are decreasing. The most painful barrier for taxi industry is license, which is a governmental permission to work in a given industry. For example, in New York City, taxi medallions sell for more than $1 million dollars each. These entry barriers are being eliminated, so sharing economy opens new opportunities for small entrepreneurship. Those car owners, who would be kicked off the market by expensive licenses, now can offer their services at much lower costs. Low-income segment of workers is able to operate at a legal market, and it can help to decrease poverty. Also shared economy platforms facilitate information sharing and reduce asymmetry. However, it is important for regulatory entities to ensure that the efficiency gains will be maximized and distributed fairly among all involved parties.

However, established firms are fighting to preserve outdated business models, specifically because they benefit from entry barriers that keep new competitors away. Taxi companies in Europe claim that Uber does not comply with the regulations and therefore creates unfair competition at the market. So Uber is now prohibited or restricted in Belgium, France, Germany, Italy and Spain. Such decisions have intensified the debate around Uber15. https://www. atlasnetwork.