Uber Drivers Concerned About Upfront Pricing

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Uber Starts Charging What It Thinks You’re Willing to Pay

The ride-hailing giant is using data science to engineer a more sustainable business model, but it’s cutting drivers out from some gains.

https://www.bloomberg.com/news/articles/2017-05-19/uber-s-future-may-rely-on-predicting-how-much-you-re-willing-to-pay

by Eric Newcomer | May 19, 2017

Uber drivers have been complaining that the gap between the fare a rider pays and what the driver receives is getting wider. After months of unsatisfying answers, Uber Technologies Inc. is providing an explanation: It’s charging some passengers more because it needs the extra cash.

The company detailed for the first time in an interview with Bloomberg a new pricing system that’s been in testing for months in certain cities. On Friday, Uber acknowledged to drivers the discrepancy between their compensation and what riders pay. The new fare system is called “route-based pricing,” and it charges customers based on what it predicts they’re willing to pay. It’s a break from the past, when Uber calculated fares using a combination of mileage, time and multipliers based on geographic demand.

Daniel Graf, Uber’s head of product, said the company applies machine-learning techniques to estimate how much groups of customers are willing to shell out for a ride. Uber calculates riders’ propensity for paying a higher price for a particular route at a certain time of day. For instance, someone traveling from a wealthy neighborhood to another tony spot might be asked to pay more than another person heading to a poorer part of town, even if demand, traffic and distance are the same.

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During the last year, Uber had attributed price discrepancies to the uncertainty around estimating fares, even as it was experimenting with techniques designed to exploit the imbalance between what customers were willing to pay and what drivers would take. The Rideshare Guy, a popular blog among drivers, conducted a study in New York City published in May, finding widespread disparities between rider fares and driver pay. Workers weren’t happy. “It is immoral and unethical behavior,” said Chris Estrada, who drives for Uber in Riverside, California.

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