Uber and Lyft operate dynamic, or “surge”, pricing: they change their prices in real time, according to supply and demand.
But is there something else behind these fluctuations in fees?
Is your taxi fare actually being personalized according to how much the company thinks you are willing to pay?
Two people getting quoted different prices for the same Uber ride might be due to the fact that Uber’s dynamic pricing algorithm is very sensitive and changes every split-second. However, I find it hard to believe that the likes of Uber and Lyft haven’t experimented with personalizing their prices by analyzing your personal data and figuring out how price-sensitive you are.
Personalized pricing, which is also known as price discrimination or price optimization, depending on whether you’re an economist or an online marketer, is a growing trend.
Companies keep these practices under wraps for a reason: customers don’t want to feel like they’re being charged more than other people. It seems unfair. However, despite all the secrecy there have been a number of well-documented instances of personalized pricing in action.
Traveling between a fancy neighborhood and a city center during peak commuting hours, for example, might cost a premium rate, because the company expects people will pay for it.
While this may not be the purest form of personalized pricing, it is “third-degree” price discrimination.
“Price routes differently based on individual riders.”
Price is based on your propensity to pay more at a particular moment.
Uber divulged that the company knew that people were more willing to pay a higher fare when their phone batteries were low. Obvious factors include the sort of credit card you use, where you live, the make of phone you’re using, and your ride history. But, really, we have no idea how much information the likes of Uber know about us and how they are using this data; their privacy policies are incredibly broad.
“These algorithms really are black boxes. Consumers should have the ability to avoid such forms of discrimination if they so choose and have greater ability to protect their anonymity.”
So, are your friends getting a different fare to you?
Why not try this experiment: order the same car for the same route at the same time. If you get differing fares, do send us a screenshot.