Ask Ariely: Surge Charges, Moving Costs, and Expiration Dates

Here’s my Q&A column from the WSJ this week  and if you have any questions for me, you can tweet them to @danariely with the hashtag #askariely, post a comment on my Ask Ariely Facebook page, or email them to AskAriely@wsj.com.

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Dear Dan,

I use Uber more and more these days, but I feel bad about using it when they slap on surge pricing rates, as they seem increasingly prone to do. Even with the surge rates, Uber is often cheaper than taxis—so why the mixed emotions?

—Wendy 

Your question contrasts two sides of pricing: supply and demand, on the one hand, and fairness, on the other. Surge prices occur when users’ demand for rides outstrips the supply that existing drivers can provide—at which point Uber adds a multiplier to each fare to encourage more drivers to work and, simultaneously, to discourage more frugal passengers from asking for rides.
From an economic perspective, surge pricing is a beautiful, two-front solution to this supply/demand mismatch. But it still feels unfair: When you take an Uber at the regular rate to start your evening and are suddenly told that the trip home will be three times more expensive, you feel blackmailed.
To think about the fairness issue, imagine that you’re very thirsty. The only lemonade stand in the area knows this and charges you three times as much for a glass. Something not too different took place some years ago in Brazil: On hot days, Coca-Cola decided to increase the prices in their vending machines. People hated it, much as you find yourself reacting to Uber’s surge rates.
This fairness question is central to Uber’s business model. For its long-term sustainability, it needs to handle the problem in a way that doesn’t feel unfair. Perhaps a loyalty program?

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Dear Dan,

My partner and I make a reasonable income, and we’ve been able to save some money over the years. We can afford to move to a more expensive neighborhood, but we aren’t sure if this is the right way to spend our money. What do you say?

—Paul 

I’d be cautious about moving to a pricier area. We tend to compare ourselves with our surroundings, and our happiness stems directly from those comparisons. If the people around us drive Hondas, we feel good in a Honda; if those around us drive Audis, our old Honda will make us cringe.
Moreover, we quickly become accustomed to the fancy new car and derive less excitement and fun from it. This phenomenon is called the “hedonic treadmill”: We continuously chase prestige, thinking it will make us lastingly happy, but we rather quickly revert to our pre-purchase level of happiness.
So you should be careful when trying to figure out the benefits of moving. Right now, you’re probably overestimating the value of a move; six months afterward, its value is likely to seem lower. As a practical shortcut for all this, you could assume that the value of moving is only half of what it seems right now—and ask if you’d still move. If the answer is still yes, go for it; if it is no, stay put, and look for other ways to spend your money.

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Dear Dan,

What’s the best way to improve the quality of marriages?

—Maayan 

The No. 1 enemy of relationships is being taken for granted. So I would set up marriages to expire automatically every five years and be renewable only if both parties opt in for another five-year period. Sure, this setup would mean that more people separate (you asked about the quality of marriages, not their longevity). But spouses would have to think more carefully about their partners, take them less for granted and thereby strengthen their relationships.

See the original article in the Wall Street Journal here.