Uber’s surge pricing model has many users frustrated, sometimes spending much more on a fare than they would initially have liked. However, as Christo Wilson, assistant computer science professor at Northeastern University, noted: “Uber is a black box: They do not provide data about supply or demand, and prices are set dynamically by an opaque ‘surge pricing’ algorithm.”
Christo Wilson and his co-authors Le Chen and Alan Mislove will present their findings at the 2015 Internet Measurement Conference in Tokyo, Japan. BetaBoston spoke with the team, who reflected on the question of whether Uber manipulates surge pricing.
“The lack of transparency has led to concerns about whether Uber artificially manipulate prices, and whether dynamic prices are fair to customers and drivers.” So the authors set out to see just how Uber works. By creating 43 virtual versions of the actual Uber app and arraying them around midtown Manhattan and downtown San Francisco, the researchers were able to monitor the number and locations of vehicles, track estimated wait times, and get information about surge pricing around the clock – amounting to more than 18 million records that captured four weeks of data in granular detail.
So what did they discover?
- Every city has “surge zones” with borders that apply the same fare multiplier across a part of the city. In other words, a rush of demand in one part of a city could boost prices on the opposite side of the city.
- Surge does not appear to increase the number of drivers coming into an area – something that is directly contrary to what Uber has said. This finding was previously demonstrated in a Washington Post article.
- Demand in San Francisco is so high that in one area, surge prices were in effect 57% of the time. Even when they added to that demand with their created accounts, it did not appear to affect surge prices.
It is interesting to think of what happens behind the black box of Uber pricing, and this gives us a peek into that world.