The study found that there are areas in Manhattan and San Francisco that always have surges. Higher prices temper riders demand while encouraging drivers to drive to busy areas. Then they studied Uber cars’ comings and goings, and eventually combined that research with Uber’s publicly available tools and information to analyze how they correlated with surge prices. Wilson said they discovered a bug in how surge prices were displayed to users that led to random, short-lived price multiples.
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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.
For Wilson, the lesson is that sometimes by waiting awhile or by knowing the boundaries of surge areas (especially in a place like Times Square), it’s possible to avoid paying more.
“Although we can not say with certainty why surge has such a large, negative effect on demand, one possibility is that customers have learned that surges tend to have short duration, and thus they choose to wait for 5 minutes before requesting a ride”, the researchers wrote.
A new study of Uber’s surge pricing found that it doesn’t lure Uber drivers to high-demand areas, although it does discourage many passengers from requesting rides.
Uber plans to update its app so drivers will know whether they can make it to a surge area in time to cash in. “If you’re a customer, it can pay to wait or walk”, says Wilson.
Maps of Uber’s surge-pricing areas in Manhattan (left) and San Francisco. In a paper being presented at a conference in Tokyo this week, they described how they mimicked 43 Uber customers using the app and also used Uber’s public interface for software developers to reconstruct what the company’s pricing system looks like behind the scenes. “There’s an algorithm behind the scenes that determines what the prices are, and you essentially have no idea what’s happening”. In cases where there was a surge, 40% only lasted five minutes.
“Normally, when you open the Uber app, it downloads the eight closest cars to you, the estimated wait time for a ride, and the surge multiplier”. A team of researchers at Northeastern University chose to find out by doing what they call “algorithmic auditing”.
Uber has responded to the study, telling ProPublica and other outlets that its own analysis shows that surge pricing works as intended and does attract more drivers. But computer scientists from Northeastern University have found that higher prices don’t necessarily result in more drivers.
The broader question the researchers raise is whether people really want to get behind an opaque pricing system. A few certainly don’t: One New York lawmaker is trying to ban surge pricing altogether.
“Uber’s reliance on black-box algorithms makes their system more vulnerable to manipulations than other online marketplaces”. The forces at play on markets like eBay and AirBnB are well understood: the supply of goods is transparent, and prices are set by competing individuals. This allegedly spikes up the price, as there will be more commuters than available cars. Crunching the data, they tracked supply and demand, how those dynamics changed over time and distance, and the way surge prices varied by location.
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“I just bought a flight home for Thanksgiving, and there’s no explanation for why it’s three times more than the normal price”.
