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A Different Approach to Improve Surge Pricing

In a paper that is published in Management Science from Columbia’s Omar Besbes UCLA Anderson’s Francisco Castro and New York University’s Ilan Lobel offer a way to improve surge pricing. This new method could potentially manage the surge while also increasing profits for the involved companies.

The current approach sees companies revising prices over a larger area than just the surge area. While the proposed approach will meet the surge in demand with a surge in supply and reduce the need to increase prices.

The model suggests controlling and adjusting the prices in rings around the surge area. This will help to bring more supply to the demand, but not so much that other areas suffer and this will improve surge pricing.

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