Study: Uber’s surge pricing doesn’t translate to more drivers (updated)

30 Oct 2015 | Author: | No comments yet »

How to hack Uber surge-charge fares by 10-20%.

The app often ramps up charges when there is higher than normal demand, multiplying the normal cost apparently to limit supply. During busy times, such as rush hour or holidays, the company enacts surge pricing — something that can be beat with a few simple strategies, according to a new study.Uber has shaken up what it takes to get from point A to point B in cities across the country with a simple premise: If you need a ride, a driver nearby could pick you up within minutes. Behind that idea is an algorithm, which promises to keep supply and demand in constant balance, encouraging drivers toward busy areas and tempering customer requests by increasing the price of each ride.

A study from Northeastern University researchers published Thursday, billed as “the first in-depth investigation of Uber,” offers some tangible tips — and other fascinating insights — about the mysterious algorithm that guides the country’s most popular ride-share service. After a month of hailing cars from points in Manhattan and San Francisco, they found that the number of rides sometimes went down — drivers stayed away knowing that they’d likely get fewer customers at those higher rates. The bottom line: Uber’s surge-pricing algorithm, which is based on supply of drivers versus demand of rides needed, resets about every five minutes, and changes based on zones that are often close together. But the researchers modelled it by emulating 43 versions of the apps, generating data from a range of cities to understand how they were being modelled. He is in Tokyo presenting the findings at the Internet Measurement Conference. “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 other recommendation is to look at the prices being offered in adjacent surge areas.

But they also found that cities are divided up into different zones, so that crossing over the borders of those areas could lead to a reduction in the price. Unless time is of the essence, you’re probably better off waiting several minutes and getting a lower-cost lift. “People love the ability to push a button and get a ride quickly and reliably—wherever they are in a city. Compared to San Francisco, Manhattan’s density was an advantage for Uber riders, as its smaller surge areas meant shorter walking times to cheaper rates. And dynamic or surge pricing helps make that possible because it encourages drivers to go to the neighborhoods with the highest demand—ensuring there’s always a ride available within minutes.

One thing the researchers couldn’t figure out was how to predict surge pricing, which means users are stuck checking their phones for rates, and then either waiting, walking or taking the hit to their wallets. A team of researchers at Northeastern University decided to find out by doing what they call “algorythmic auditing.” “If you go on eBay or Amazon, you can see, these are all the people who are selling the product, these are all different prices,” says Christo Wilson, one of those researchers. “But Uber is different. Contrary to the findings in this report, which are based on extremely limited, public data, we’ve seen this work in practice day in day out, in cities all around the world”

The team tested their tracking methodology on a public database of New York taxis to make sure they could extrapolate information about the vast majority of cars in the fleet. Like Google altering search results based on location, or Facebook selecting what you see in your newsfeed, Uber’s algorithms are a “black box” — not transparent to the user, or completely to the driver, for that matter.

Wilson says he hopes the results “help the public better understand and evaluate the role of these algorithmic systems in everyday life” — especially after criticism Uber has faced for charging surge rates during Hurricane Sandy and the Sydney, Australia, hostage crisis, the study notes. – The team found a six-month long bug in the system that was causing some people to randomly get lower fares than others requesting rides in the same area. (The team contacted Uber, which has since fixed the bug.) – Plus, in the battle of East-West expensive cities, Wilson says New York City is the better market for riders. But in this case, the result is mixed.” With that, comes advice to Uber users: When prices are surging, waiting a few minutes or walking a few blocks to a different area may result in a cheaper ride. Wilson suggests that it’s the short lifespan of a surge price that may create the mixed response from drivers, not giving drivers enough time to respond to the price surges that effectively reflect the demand from 5 minutes earlier.

Uber spokeswoman Molly Spaeth tells All Tech that the company has heard its drivers’ calls for better ways to make use of the surge prices — to make them work as they are intended.

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