How to get around Uber’s surge pricing

31 Oct 2015 | Author: | No comments yet »

Can Uber’s surge pricing be gamed?.

Users know that Uber’s surge pricing is in effect when ordering a car from their smartphone and their app reports: “Demand is off the charts! It’s not a trick but it’s not really a treat either: Uber is warning its customers they may have to pay more if demand for a ride is greater than the number of vehicles available on Halloween. If you’re trying to get an Uber home on Halloween this Saturday, you’re likely to be faced with the dreaded surge multiplier that asks for twice or quadruple the regular fare. Fares have increased to get more Ubers on the road.” But it doesn’t always work that way, according to researchers at Northeastern University who studied the car-hailing service in New York and San Francisco. The study also cited anecdotal evidence of “collusion.” That is when drivers in a specific area purposely go offline to set up a supply “shortage,” which in turn creates a price surge.

But researchers Le Chen, Alan Mislove, and Christo Wilson found that while surge pricing – which updates prices every 5 minutes – is responding to supply and demand, it isn’t working exactly as Uber intended. If you’re on the border between two of these areas, you could just walk a few metres and notice a price change. “Two users standing a few meters apart may unknowingly receive dramatically different surge multipliers,” the paper said. They then tested their methodology on a publicly-available database of New York taxicabs, eventually combining their own Uber data with the company’s studies and publicly available data.

According to the researchers’ data, Times Square in Manhattan is one of those corner cases. “For example, 20 pc of the time in Times Square, customers can save 50 pc or more by being in an adjacent surge area,” the researchers wrote. Uber argued the researchers’ findings didn’t show the full picture. “Contrary to the findings in this report — which is based on extremely limited, public data — we’ve seen this work in practice day in day out, in cities all around the world,” Uber spokeswoman Molly Spaeth told ProPublica in an e-mail. To get a look under Uber’s hood, the researchers created 43 fake Uber accounts in downtown San Francisco and midtown Manhattan and ordered minicabs through the service over four weeks to track the dynamics of surge pricing. “We see that around 40pc of surges only last five minutes, while about 70pc of surges last 10 minutes or less,” Dr. Wilson told the USA TODAY Network. “This essentially means that if you observe surge prices on Uber, your best bet is to just wait it out, because they typically don’t last long.” The research also claimed that during surge times, drivers actually leave the areas in anticipation of fewer riders, rather than flock to it as Uber has claimed.

Part of the issue, the researchers say, is that Uber has manually divided many cities into distinct surge areas – Manhattan has 16, London has 19, Boston has 9 – where prices are set independently of each other. However, Uber told ProPublica that the study data was limited and only based on public data, while their own, more extensive dataset has shown the opposite: drivers are drawn to surge areas because they can earn more.

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