It is simple economics to relate demand and supply to price. Surge pricing embodies this law (Green light for taxi firms to adopt surge pricing; March 18).

While the concept of surge pricing is sound, the devil lies in the details of its implementation.

The taxi fare structure currently consists of a few components: first, flag-down and booking charges; second, distance-based meter charges; third, surcharges ranging from midnight to peak-hour surcharges; and fourth, miscellaneous charges such as airport charges.

With the introduction of surge pricing, the fare structure will have to be reviewed.

Surge pricing is similar to the surcharge imposed during peak hours, when demand is high.

We need to ask ourselves what is the reason behind the introduction of surge pricing.

Are we incentivising a lack of supply to induce surge pricing? It may bring us back to the days when we were not able to hail a taxi just before midnight.

Are we helping the taxi drivers to level the playing field?

Are we incentivising a lack of supply to induce surge pricing? It may bring us back to the days when we were not able to hail a taxi just before midnight.

In the near future, perhaps we will not be able to hail a taxi whenever the surge pricing is in effect.

Desmond Teo Mingjie