This is hidden brain.
I'm Shankar Vedantam.
My guest today is Keith Chen.
He's a behavioral economist at UCLA.
He's also the head of economic research at Uber, the ride sharing company.
Keith's going to talk about some of the behavioral anomalies that Uber has observed, and we're then going to talk about some of Keith's earlier work, which explore the evolutionary and cultural origins of certain biases and heuristics.
Keith Chen, welcome to Hidden Brain.
Thank you so much for having me.
I'm a big fan of the podcast.
I want to start by talking about surge pricing.
Uber charges more when demand is high, based on the idea that this is going to draw more drivers into the pool and increase the supply of rights.
Now, this makes perfect sense from the point of view of a traditional economist.
But you're a behavioral economist, and you must know there's something about charging different prices for the same products that rubs customers the wrong way.
They say, hey, five minutes ago, this ride was $10.
Now it's 20.
So, as you can imagine, I hear over and over again, both at my dinner table and at family gatherings, that surge pricing can feel very unfair to customers.
But it's been a really integral part of Uber's success, precisely because the whole goal of the company was to replace a really frustrating experience with taxi with a service that's just ultimately reliable.
And the only way to do that, the only way to be able to get basically everyone who lives in a dense part of a city, a car within five minutes, was to do that through dynamic pricing, through giving drivers a very, very strong incentive to want to get to the places where they're needed the most.
And also to get riders who could afford to wait a little longer, say they're at a bar, to say, well, if it's more expensive to take a ride right now, go ahead and relax and sit back.
If you can wait 15 minutes, the drink's on the person who's got to go now, right?