Uber and Lyft Suggest the Days of Cheap Rides Could Be Over

https://www.wired.com/story/uber-lyft-suggest-cheap-rides-could-be-over

by monsieurpng • 7 years ago

149 309 7 years ago

freyr2• 7 years ago

The article was written back in August, so are we already seeing the higher prices?

I feel like I've seen pretty high prices in Boston lately. On the other hand I took a trip to Las Vegas and suddenly Lyft was dirt cheap again.

ghaff12• 7 years ago

It seems to vary a lot. I was on a business trip to San Diego recently and airport inbound (taxi) and airport outbound (Lyft) were about the same price, albeit with the taxi ride a little shorter. OTOH, whenever I visit Raleigh, Lyft still seems about half the price of a cab.

xeromal• 7 years ago

Yeah, the prices are pretty low here in LA too. When I go to the South to visit family, Uber is so expensive.

pen2l• 7 years ago

I've noticed this. I can reliably count on Uber/Lyft to price gouge me whenever they get the chance.

Yeah but come on though, the cut the driver has to take, the cost of car maintenance, the cut Uber is entitled to for giving you a reliable service of connecting you to a driver (and co-pool-riders) and making this process smooth -- compare all of that with what a taxi used to cost, it's still pretty cheap in my opinion. Well, at least in the center city where I am (5 dollars yesterday for a ~5 mile ride, not bad).

OnlineGladiator2• 7 years ago

Why do you assume that cost isn't being subsidized? Uber and Lyft are both still hemorrhaging money. I'm willing to bet the real cost is at least twice what you mentioned.

Yesterday it cost me $30 to go 5 miles via Uber, and I chose that over Lyft's $40. Not a busy time of day so no price surging. This is in San Francisco for a frame of reference.

freyr2• 7 years ago

(Sorry, I'd deleted the sentence you quoted right as you replied).

I don't mind them raising prices as is needed.

I'm complaining specifically about price gouging. For example, it cost me $8 to travel from my house to a bar the other night, to meet up with some friends. Then it started drizzling, and I had to pay $40 for the ride home.

I get that they're taking advantage of temporary increased demand, but it's not a good customer experience, and next time I'll arrange another way to travel.

SllX• 7 years ago

They’re about 2.5x to 3x what they were when I first started using Lyft, and even shared rides are pricey enough and take long enough that they have no edge over government transportation in most circumstances and I’ll generally call a private cab if I’m calling a cab at all.

These days I prefer to get myself around without either, but if circumstances prevent or make that option look unattractive, I’ll generally favor government transportation over Lyft or Uber and only call a cab from one of them if I’m in a hurry.

rasengan• 7 years ago

This is untrue. Without a doubt, with autonomous vehicles, efficient energy usage, storage and harvest via non eco damaging sources like solar power, the cost of rides will get cheaper.

helen___keller3• 7 years ago

Sure but they need to stay solvent until then

quaquaqua1• 7 years ago

If they don't remain solvent then theoretically the IP would be bought by a solvent corporation that wishes to fill the void.

That is of course unless Uber asks way too high of a price.

That's basically what happened with the Yahoo auction

dpau• 7 years ago

a bit optimistic i think. the algorithms are already being tuned to "whatever riders are willing to pay" while uber and lyft are incentivized to make as much money as possible.

heavyset_go4• 7 years ago

Costs don't dictate prices.

quotemstr• 7 years ago

They do indirectly. A big gap between costs and prices invites competition, which lowers prices. Part of the "play" that ride sharing companies are making is building a moat around themselves so that they'll be able to discourage competition for a while.

formercoder• 7 years ago

They do for commodities, which transportation in this case generally is.

sweeneyrod• 7 years ago

Why should we expect Uber and Lyft to be the first to solve autonomous vehicles, rather Google/Tesla/a startup that is completely dedicated to self-driving?

rongenre• 7 years ago

Autonomous vehicles in cities aren't even close. And if they exist, then all the capital and operational expenses of ownership - which they've been fooling drivers into paying -- are theirs.

bdcravens• 7 years ago

We're probably 10+ years from any of that paying dividends for Uber and Lyft.

throwaway857384• 7 years ago

I'd say, once people stop dumping money into these companies and they can no longer operate at a loss, the real price of a ride/delivery will become clear.

ghaff12• 7 years ago

It's a reasonable working assumption that "ride share" prices end up somewhere around where taxi prices are--with the possible exception of places like London where black cabs are somewhat of a premium service relative to minicabs, etc.

seriesf3• 7 years ago

I don’t see how the Uber model can ever approach the price of a taxi. Traditional taxis had purpose-built vehicles, shared garages, parts bought at wholesale, and cars on duty all day every day. Uber drivers have disposable Toyotas, pay individually retail prices for insurance, maintenance, and parts, and their vehicles are usually parked. The traditional model has the advantage on cost.

heavyset_go4• 7 years ago

Prices have been more expensive than traditional taxis in my market for over a year now.

justforyou• 7 years ago

Likewise.

aabhay• 7 years ago

This. Clearly this has to be the stable state for these services. A taxi is naturally free to operate in a way they see fit (finding narrow strategies and routes) while an Uber is constrained by a routing system. If you find a taxi, you can expect to pay a more optimized fare considering market dynamics, while an Uber has to suffer very suboptimal requests.

In cities like Vancouver, taxis seem to spend much less time idling than Ubers in SF.

pradn• 7 years ago

"When will these darlings of Silicon Valley begin to turn a profit?"

The funny thing is criticism of these two companies has been vociferous on Hacker News since the very beginning. I'm not sure what company I'd even call a darling. Every example I can think of FAANG, Dropbox, Slack, etc all have various criticisms. Perhaps Spotify? But it's not a Silicon Valley company.

fallat2• 7 years ago

I've been on a SharkTank binge just for fun, and one thing I notice is, every time a Silicon Valley company goes to pitch, the idea has some pretty bad problems:

1. The margin is high but the idea is easily copied

2. A ton of money has already been invested, and still not making money

3. Other things I can't remember at this moment

I think SV has some sort of problem when it comes to starting businesses. Rarely something is organically growing. It's like SV people just throw money at a wall until something sticks, so it explains the thousands of failure companies.

Seeing SV companies through the eyes of an investor, I'd be ultra cautious. Companies and ideas are a dime a dozen there from what I see. Until you find out each has had +$100,000 pumped into it various ways and operating at a loss. It's almost like they want to force you to think the idea is good because "look, it's existed for X years!".

Retric• 7 years ago

The go big or go home mindset is useful for specific kinds of investors. If you have 100+ million your not going to notice the returns if you’re a partner at a modestly successful restaurant.

Yes the odds are terrible that you happen to fund the next Google. But, the allure is the same thing that gets people to play the lottery even with negative expected returns.

askafriend• 7 years ago

You shouldn’t be using SharkTank to form your view on Silicon Valley...

Some of the worst companies get on there, SV or not. Think about it, why would a good company need to go on Shark Tank? They can raise from much better investors if it was a good company.

akavi• 7 years ago

It feels like Dropbox and Slack have been spoken of positively more often than not. And I'd say Stripe, Twilio, and various other B2B "Infrastructure" companies seem to get the warmest response.

You're right though, if HN is at all representative of Silicon Valley, Uber and Lyft are hardly its darlings.

admn2• 7 years ago

Pretty crazy with Juul, WeWork, DoorDash, and Uber / Lyft all struggling (or showing their true colors) that all the things they sought to kill are coming back. Taxis, cigarettes, picking up your own food! It's amazing to me that people were having food delivered from a half mile away.

luckydata• 7 years ago

They weren’t try to kill anything, they just wanted a piece of the action.

thdrdt• 7 years ago

This is because most of them start with heavy investments.

But when time has come to make their own money they will discover it is not so easy as thought.

paggle• 7 years ago

With the food delivery and meal kits and stuff, they were just selling that stuff for less than it costs. I provided thousands of dollars of revenue for Blue Apron style meal kits and food delivery. As soon as they charged market rate for them, I stopped.

Barrin922• 7 years ago

Pretty crazy with Juul, WeWork, DoorDash, and Uber / Lyft all struggling

Given that the entire value-added of a company like Uber is getting a taxi to you slightly faster it's not surprising at all. Uber didn't make cars cheaper, drivers faster or added productivity in any other way plus they have a gigantic and expensive tech overhead, so it was never at all clear to me how they're supposed to be both competitive and more profitable than a regular bunch of taxi companies.

It's just like movie pass. As long as you have investors throwing money at you you can pretend that you're actually doing something but selling people a dollar for 75 cents isn't a business.

wilde2• 7 years ago

That’s an oversimplification. Uber’s primary innovations were social. They convinced riders that it was safe to jump into a stranger’s car, and drivers that it was safe to run an illegal taxi business. They managed to do both of these things effectively in large enough volumes to change how people think about taxis. Both of these things seem boring and normal now, but they were radical a decade ago.

leetcrew9• 7 years ago

the value add of uber is that you can use your phone's GPS and a map to tell someone where to pick you up instead of calling up the taxi company and describing where you are. I know taxi companies are starting to implement this stuff, but they didn't seem to be in a big hurry to do it before uber/lyft showed up. I haven't tried in a while, but I bet the smaller cab companies still don't have anything like this.

even if their value add is just getting a driver to me a little faster, this isn't nothing. the difference between a five minute and a ten minute expected wait isn't just five minutes of wasted time; at the margin, it's whether the customer decides to purchase a ride at all.

listenallyall• 7 years ago

Of course Uber added productivity -- it enabled a bunch of people who previously were sitting on their couch doing nothing, to become paid drivers. And while Uber didn't make cars faster, they made a car TO YOU faster. Usually within 5 minutes, whereas most taxi pickups (outside NYC, etc) could easily be 15-60 minutes, if they came at all.

maksimum2• 7 years ago

more precisely predict what riders might be willing to pay for a ride

It's weird to me that this sort of price discrimination is legal.

E.g. given this information, my incentive as a rider is to never tip (so that their algorithm doesn't identify me as "willing to pay" more). Maybe I could also make a new Lyft account every time I need a ride?

mlyle• 7 years ago

> more precisely predict what riders might be willing to pay for a ride
It's weird to me that this sort of price discrimination is legal.

I don't interpret this as charging different customers different prices per se. But there are different prevailing conditions with different pricing justified (other than simple congested/not congested). Knowing what your service is worth to customers so you can extract a greater fraction of this is pricing 101.

maksimum2• 7 years ago

I don't interpret this as charging different customers different prices per se.

Based on my experience Lyft and Uber charge different prices to different customers with identical trips. I've tested this by asking friends with who I'm about to share a ride with to request the same trip as me, and compare prices. We've observed differences of 10-20%.

Knowing what your service is worth to customers so you can extract a greater fraction of this is pricing 101.

Where this becomes problematic is in the age of big data. When a company can build an accurate profile of me, they can extract maximum prices from me. We need laws that mandate what definition of "profile" is allowed to be used for pricing.

I'm not sure why we accept price discrimination at the individual level for airlines and Lyft/Uber. I'm pretty sure people would be outraged if Amazon started price discriminating based on your purchase history.

ghaff12• 7 years ago

I think that statement was about riders in the collective sense. Riders are typically willing to pay more, e.g. on New Years Eve than on a random afternoon.

But, in any case, dynamic pricing at both the individual and the collective level is pretty widespread these days. By and large--there are some exceptions--companies don't have to sell at a fixed price to all people at all times.

bransonf2• 7 years ago

This article’s a couple months old, so it misses what I think is going to be a lot more definitive against Uber/Lyft.

That is, workers are starting to successfully unionize. Both companies have delayed it as long as possible, but it’s going to happen. And when it does, it will either burn more of their cash or up the customer cost.

cheriot• 7 years ago

Would a union be able to stop non-union drivers from signing up? It seems too easy for new workers to cross the picket line for a union to have much power here.

bransonf2• 7 years ago

To clarify, in many cases it’s actually states declaring Uber/Lyft as employment. They’ve managed to stay legally bound to the terms of hiring ‘contractors’ but states like CA are putting an end to this.

6gvONxR4sf7o4• 7 years ago

...the company’s upcoming pricing algorithms, which they hinted might be able to more precisely predict what riders might be willing to pay for a ride.

I hate the whole idea of this. If they track you around, maybe realize you order from fancy places on uber eats, then they will raise prices on something that costs them the same. There's something that strikes me as especially awful about automating the "how much is this individual willing to pay." It's like the worst parts of searching for air fare.

Yet another reason to advocate for privacy, so they can't just buy records about you to determine your price sensitivity from the rest of your life.

If everything everyone bought had perfect information on what they're willing to pay, I wonder what markets would look like. Would getting a raise immediately cancel itself out?

save_ferris• 7 years ago

Couldn’t this technically qualify as discrimination? I vaguely remember reading about how one of the big dating apps increased prices with a user’s age, but had to revert the policy because it amounted to age discrimination.

I would hope income qualifies for the same protection, but maybe not.

pb73• 7 years ago

It does not.

Edit: Answering the very last part of the comment; it does not have the same protections.

6gvONxR4sf7o4• 7 years ago

I think it's probably like any other decision you make on a person by person basis, like salaries. You can't use protected stuff as a factor, but you don't have to pay every employee doing that job the same amount.

esotericn• 7 years ago

Yes, it is discrimination.

I believe that you're asking whether it's legal. Also yes.

suyash4• 7 years ago

It is price discrimination but very hard to prove as one person doesn't know what another person is paying. The algorithm is proprietary.

cortesoft6• 7 years ago

No, income is not a protected class. If you could show that the price discrimination unduly hurts a protected class, you might have a case, but that is unlikely.

OkGoDoIt3• 7 years ago

Tinder almost certainly still discriminates pricing based on age. A friend of mine signed up for two new accounts a couple months back and the account where he listed his age as in his 20s would have been half the price as for an upgrade subscription for the one where he was listed as being in his 30s.

Maybe they are using other factors, maybe he was in a different part of town when he signed up. Maybe it has to do with the school or the job listed in each account. You don’t know, and therefore you can’t prove anything. As long as the algorithms are a black box it’s hard to take a company to court over discrimination.

pmoriarty• 7 years ago

This is exactly what the rich need: more protection.

They're just so unfairly treated in the rest of society. It would be so unfair if Uber also discriminated against them.

alecbenzer• 7 years ago

I share the intuition that price discrimination feels wrong, but I have trouble really articulating why.

Why is "the seller would have given it to me for less" any better than "the buyer would have given me more for it"?

Ericson2314• 7 years ago

The problem is there is this bell curve thing. Charging rich people more sounds good and redistributory. But the really rich people have more leverage because there are so few other buyers with their purchasing power completing.

End result would probably be like super high income tax with low rate "capital gains" loophole.

6gvONxR4sf7o4• 7 years ago

I think it is similar to the frustration you'd experience if you told a taxi driver you're running late and they responded "okay, then it costs triple." It's an asshole move. Or if you told the bartender that you're celebrating getting a raise and they responded "okay, then your beer costs two bucks more." Or if there's a medicine that usually just reduces heartburn and costs $20, but you need it to survive, so they increase the cost to 90% of your life savings, just because you'll pay it. I'd say it's super dickish, but also struggle to logically articulate why.

redler• 7 years ago

The more targeted the discrimination, the worse it feels. They're targeting your ability to pay, but also your weaknesses. Imagine highly accurate, pervasive, and real-time user profiling (and sharing of information among big companies), and it's not hard to imagine, in the case of Uber, being charged more the day after your paycheck clears, more if they know your specific flight arrived late, more if they know the car rental companies at the airport have low inventory, more if your selected destination is the hotel at which they know you have a reservation, only being presented with "black car" options if they know you have an upcoming business meeting, etc.

rdiddly2• 7 years ago

Neither is better, they're just different sides of an adversarial relationship. I think maybe the problem (and I don't know if this articulates the point well or not) is making the relationship or transaction adversarial in the first place. Adversaries are assholes to each other, hurting each other to help themselves. Generally that is thought of as bad, and you know, fuck those people.

As a thought experiment, what if we make the cab driver example be about time instead of money. Pretend it benefits cab drivers somehow to make rides take as long as possible. (I say pretend, because in most cases in the real world they would be wasting their own time as well.) So let's say you have to be somewhere at a certain time, but earlier is better. But the driver knows exactly what time you have to be there, and makes the trip take exactly that long, even though he could've gotten you there faster. You can see he's doing subpar work, doing worse for you on purpose to benefit himself.

imustbeevil• 7 years ago

From an efficient market standpoint, a good balancing measure would be if consumers knew exactly what it cost Uber/Lyft to provide the service. That way even if they charge you more for being rich, you can make an informed decision whether or not you want them profiting as much as they are from you.

A competitor might even find an advantage by providing that information. For example, if a car service told you exactly how much the driver made and how much the service took as a cut, you might be willing to pay more because you know where the money is going.

sokoloff6• 7 years ago

Why would I care how they divided their money between the platform, the driver, and the company holiday party at HQ?

I don't need nor even want to know how much Dunkin Donuts pays to make a donut or Exxon to buy, refine, and truck a gallon of gasoline to me.

stereolambda4• 7 years ago

You're presenting a future where there is (in the limit) no point in earning money. Lately there was a discussion about how in the future it makes no sense to buy insurance if someone is willing to sell it to you, you are always better off saving and you won't get insured if you actually need it[0].

I understand all these specific scenarios may be kinda-dismissed with some commonsensical argumentation, but has someone somewhere (in the academia?) explored how perfect information could break the economy/capitalism in some way? It looks like an interesting problem theoretically. (I don't feel like arguing either way, just would like a deeper look on this.) It's my understanding that economists actually think that perfect information should be a prerequisite/an effect of efficient markets, but did they really mean the same thing when this was formulated in the last century?

[0] this tree may make this impression https://news.ycombinator.com/item?id=21778890

wutbrodo5• 7 years ago

there was a discussion about how in the future it makes no sense to buy insurance if someone is willing to sell it to you, you are always better off saving and you won't get insured if you actually need it[0].

This is a misunderstanding of how insurance works. It makes sense to self-insured in expected $ value, but not necessarily in expected utility.

There's nonzero value to lowering volatility[1], and the insurance company creates surplus by coordinating the pooling of risk across many people.

For an easy example of the difference, for an easy example of the difference, I wouldn't take a 50/50 coin flip that would either cost me $1 million dollars or gain me $1.1 million; even though the expected value is $50k, because I couldn't afford such a high chance of financial ruin. I would however, sell the chance at this bet to an insurance company for $40k, and if they were large enough to absorb the loss (or bought many such policies), they would take it and gain $10k minus the (lower) value they place on the risk. (All numbers are made up, obviously).

[1] this is a simple enough concept that you can derive it graphically from a utility/$ graph, and requires only the assumption of diminishing marginal utility of $

clairity2• 7 years ago

you're grossly underestimating the absolute ingenuity of 7-10 billion people jostling against each other for status. even if people were taxed such that net income was exactly the same for everyone, higher earners would still try to claim superior status from it.

and that theoretical limit of perfect, simultaneous, accurate information is akin to the heat death of the universe, and really not worth practical (as opposed to theoretical) discussion. for all practical purposes, at the very least there are rate limits related to the propogation of and reaction to perfect info, not to mention all the ways people will actively obstruct it.

blululu• 7 years ago

Discriminatory pricing feels nasty when you're get the short end of the stick but any pricing scheme will have bias. Having a high wage earner pay the same fare for a service as a low wage earner gives a much better deal to the wealthier person. (In Finland traffic tickets are calculated as a percentage of your income) In many countries you will pay a surcharge if merchants think that you are wealthier since it implies a greater ability to pay. (Bulk discounts are not universal) The point where a flexible price structure becomes a problem is where price gauging is being practiced to take advantage of people in a bind.

suyash4• 7 years ago

Finland traffic tickets sounds like a horrible idea.

mcrae• 7 years ago

Isn’t price discrimination embedded in nearly every transaction we engage in, though?

What is the difference between price discrimination between classes of individuals (to your point, business vs leisure travellers), and individuals themselves?

Nearly every pricing guide on this site recommends offering an ‘invoiced’ pricing plan for enterprises for substantially more than the same service on credit card billing. Price discrimination at its finest and, I would argue, a good thing for suppliers to extra more of the benefit they are providing to consumers.

If the price of the Uber ride is higher than you value that ride... just don’t buy it. Otherwise enjoy the value you have extracted from Uber

suyash4• 7 years ago

No, go to amazon.com and look for your favorite product, now tell me if 10 people from different income level see that, will the price be diffferent?

wutbrodo5• 7 years ago

If the price of the Uber ride is higher than you value that ride... just don’t buy it. Otherwise enjoy the value you have extracted from Uber

The surplus from a trade is divided between the buyer and the seller, and each party's surplus ranges from epsilon to 1-epsilon. Your claim that a move towards universally giving one party ~0% surplus and the other ~100% doesn't matter is self-consistent, but it shouldn't be surprising that society would concern itself with how surplus is divided (eg antitrust laws or any other competition-regulating policy)

chrismcb2• 7 years ago

It typically is not the same service. The enterprise plan typically comes with better or faster customer support, or more resources, or something.it may not always reflect the entire value of the value add. But it is rarely the same service.

tmerr• 7 years ago

Knowing the max someone was willing to pay could help an actor set their prices optimally where there is no competition. Where there is competition, setting price to the max someone is willing to pay could drop overall profits since a competitor would happily undercut. So it does not change the rules of the game.

Companies already price by predicting what people are willing to pay, by theory and experimentation. I wouldn't expect them having perfect information change much other than quicker convergence to the prices they would set anyway.

sagarm• 7 years ago

With only two competitors here, there'll be plenty of producer surplus I'm sure.

stereolambda4• 7 years ago

But does that guarantee that the prices won't increase proportionally to your income? Companies are incentivized to make you buy stuff, not to make you motivated to make money.

lerouxmlr• 7 years ago

yeah, agree fully with this. seems like a grey legit way of squeezing people for more money based on their normal day run indulgences.

ldoughty• 7 years ago

Except corporations have already agreed to not seriously undercut each other... Geographic monopoly, understood collaborative price hikes... Forced plan changes post-capture that eliminate the most common plan and squeeze out an extra $5 per customer....

Simply having another player in the field is not competition, despite the federal government's claims.

wutbrodo5• 7 years ago

It's not that hard to (legally) collude on something like this, especially with an effectively-two-participant field, the way Uber and Lyft are in many markets. It's one of the basic solutions to the iterated prisoner's dilemma (though it's by no means guaranteed).

WalterBright• 7 years ago

Companies already price by predicting what people are willing to pay

So does anyone else who is doing work. For example, have a contractor come by your home to give an estimate on roof repair. It'll be highly dependent on him sizing up you and what you can apparently afford.

6gvONxR4sf7o4• 7 years ago

If there were an ability to resell on a secondary market it'd probably level out like you say. If you sell me something at a super low price, I can turn around and resell it for a typical price, which would usually level this out (effectively being more players in the market). But with todays "everything is a service" market with 50 pages of terms and conditions, it doesn't work.

opportune• 7 years ago

The worst part about price discrimination is that if there are a limited number of players in the market, it feels like, and maybe effectively is, price fixing.

Now, it may not play out as direct collusion, but if only one company engages in it, they won’t be competitive for their wealthier customers, so it doesn’t make much sense. But if both participants in a duopoly do it, you have no options. It wouldn’t be possible to enact price discrimination for something with lots of competition

C14L2• 7 years ago

they won’t be competitive for their wealthier customers

Sure they will. You don't charge too much so that the customer will start feeling that its worth their time to look for alternative offers. That upper limit it usually higher the wealthier (or "spending happy") the customer is. So it totally makes sense to establish that limit individually per costomer.

trimbo3• 7 years ago

I mean, do you own a nice house or car?

If you do, you've already experienced this sizing-up. A contractor comes to the house and sees you can afford 2x what they'd normally charge. A mechanic for your Lexus charges N times as much as the same mechanic would for your Toyota, even though they're the same parts and manufacturer.

victor9000• 7 years ago

Which is why you should get wage quotes over the phone.

buckminster• 7 years ago

Similarly, the price of a venue or a band or a caterer is at least double if it's for a wedding.

o-__-o• 7 years ago

Had an Audi, did the work myself. Audi parts are not VW parts just like Porsche parts are not Audi parts! I think a relay or a few hoses were shared across the car companies but nothing to write home about.. Second Audi’s are heavier than their VW counterpart so they needed stronger equipment. Made and shipped from Europe. Third, Audi had a tighter build process so a lot more work had to be done before a similar task on a VW (timing belt comes to mind). The same exists for Lexus/Toyota, Ford/Lincoln, Nissan/Infiniti.

What I’m saying is your nice house may cost 2x because your nice house has nice things that increase labor costs. Just like that upsized vehicle manufacturer..

doublement• 7 years ago

This is exactly why I rent my dwelling and drive an inconspicuous car.

C14L2• 7 years ago

Then, soon, there will be Uber arbitrage: I only order food from cheep places, so I get great prices for Uber rides. Now, you can pay me to order the Uber ride for you. I get half of what you safed had you ordered the ride yourself. Deal?

(I never used an Uber and have no idea if that would work)

brightball2• 7 years ago

It would likely lead to people working harder to find better prices.

I moved into a nice house that was about to be foreclosed a couple of years back and after moving in, we had to get some of the same things done that we’d had at our previous home. The quotes were usually 2-3x higher for the exact same job.

Enginerrrd• 7 years ago

This isn't all exploitative. I used to work trades and we regularly found the richer clients to be absolute PITA's about super minor details. They were the first ones to threaten not to pay unless we redid a big thing and also wouldn't offer to compensate for any phase of that.

cortesoft6• 7 years ago

This doesn't make any sense... what these algorithms are doing is trying to determine how price insensitive the person is... they are trying to find a price point where, for this individual, they aren't going to make the effort to find an alternative because it is not worth the extra savings.

If this leads people to work harder to find a better price, their software isn't working right... it should be charging that person less (just lower enough to not trigger this 'find a better price' desire)

How much time a person is willing to spend to save money is going to be very proportional to how much money that person has, and this makes total sense.

KorematsuFred2• 7 years ago

That is how the market works even today without Uber and Lyft too. Everyone is trying to figure out the max you are willing to pay for something. It is just that finding that out is expensive and sometimes exceeds the benefits of bigger margins. Some business like Costco on other than totally opt out of the whole guessing game and would rather offer few choices at fixed price.

Willingness to pay more also tells you a lot about the person's need and if the person is willing to pay more it is a signal that the person needs to more. Servicing those needs first is often beneficial for the whole society. For example a person traveling for an important business meeting that will help him earn lot more would be willing to pay more than teenagers going to the mall. A person trying to catch his international flight worth $$$$ might be willing to pay more than someone just going to get a haircut.

Not only this sort of differential pricing makes sense it benefits everyone without hurting others.

LeftHandPath• 7 years ago

Willingness to pay more also tells you a lot about the person's need and if the person is willing to pay more it is a signal that the person needs to more. Servicing those needs first is often beneficial for the whole society.

However, in this case, Uber and Lyft are not actually using willingness to pay. They are using ability to pay. To make the system more efficient, as you suggested, they would do best to implement a bidding system so that customers could directly opt to pay more (directly indicating their level of need).

The algorithms in the article would unfairly prioritize wealthier drivers over poorer ones, if used to maximize margins, regardless of the level of need of either party. Wealth (ability to pay) is not an indicator of how badly you need to be somewhere else. Willingness to pay is. Their system is flawed.

The differential pricing you've described might be beneficial to society, but the differential pricing discussed in the article is most certainly not.

chewz• 7 years ago

Yet another reason to advocate for privacy,

Take a taxi, pay with cash. Private.

OkGoDoIt3• 7 years ago

I agree in theory, but in practice taxis are significantly more expensive than even Uber. And you don’t know the price upfront. I don’t think I’ve ever had a taxi experience where I was happy with the value, at least in the USA.

sidechaining• 7 years ago

This right here is already happening in pricing for Uber passes. I’ve had the first month’s pass for a dirt cheap price and then it kept increasing over the months until I discovered I was not happy paying an increasing price. So, one month I did not renew my pass and bam - the price went back to its lower default price again...

crazygringo• 7 years ago

Everything about modern pricing theory -- from menu design to coupons to sales to promo codes advertised only to specific markets -- is about getting people who can pay more, to pay more, while still making a little bit of money on those can only afford the bare minimum.

A millenium ago when you bought everything haggling in the market, the rich guy was paying 3x as much as everyone else because the vendors knew they could make him. Meanwhile, the impoverished grandmother gets the unsold leftovers for free. (The specifics obviously are made-up, but you get the gist. It's still the same in much of the world today. Foreigners visiting China pay much, much much more than locals.)

This is the same human principle, just data-driven. It's kind of like progressive taxation, too: those who can afford to pay more, do.

Now you may object: Uber doesn't need the money. But it does need to be able to sustain itself long-term. So much like first-class airplane fares allow economy flights to be as cheap as they are, similarly Uber passengers with the ability to pay more are exactly what make it cheap enough for other passengers to afford at all.

s1artibartfast• 7 years ago

I tend to agree, but think that there is a line somewhere where it become price gouging.

What if Lyft or uber have data that you have a flight to catch, are 9 months pregnant, or disabled?

davidgay2• 7 years ago

Foreigners visiting China pay much, much much more than locals.

Some years ago, I had an epiphany on the reverse-equivalent of this: foreigners visiting Switzerland pay exactly the same as locals. And it has pretty much the same effect.

tehjoker• 7 years ago

This principle only makes sense if the contributions are funding a common service with a fixed cost. If there is no upper bound on the maximum cost, as is true of corporate profiteering, it is merely extraction with none of the progressive overtones as there is no longer a relationship between what you pay and the common good.

This ignores that ubers and lyfts are a bandaid on our abysmal public transit and are a play by the wealthy to corner the transportation market until they can jack up the price for their own benefit.

ben_jones• 7 years ago

A millenium ago when you bought everything haggling in the market, the rich guy was paying 3x as much as everyone else because the vendors knew they could make him. Meanwhile, the impoverished grandmother gets the unsold leftovers for free. (The specifics obviously are made-up, but you get the gist. It's still the same in much of the world today. Foreigners visiting China pay much, much much more than locals.)

Did he though? Or did he send his servant to the market for him and chastise the servant if ever he over-payed by a penny or more?

It's a real stretch to try to add a moral imperative to Uber's price gauging. Speaking of historical references, why don't we mention Uber's history alongside this rich old man of yours?

Johnie• 7 years ago

What you're referring to is the three degrees of price discrimination.

https://www.investopedia.com/ask/answers/042415/what-are-dif...

First Degree: This type of pricing strategy takes place when businesses can accurately determine what each customer is willing to pay for a specific product or service and selling that good or service for that exact price. (ie car sales)

Second Degree: Companies price products or services differently based on the preferences of various groups of consumers. (ie Costco vs Whole Foods)

Third Degree: Companies price products and services differently based on the unique demographics of subsets of its consumer base, such as students, military personnel, or seniors. (ie flights)

The purpose here is for a company to identify the maximum consumer surplus it can acquire. As commented below, this surplus also changes based on supply/demand. Supply/demand change based on competitive products or substitute products.

mirekrusin2• 7 years ago

Hey, we need a name for that "predictive discrimination"?

brokenmachine3• 7 years ago

Asshole AI?

mirekrusin2• 7 years ago

What is (legally speaking) a difference between "algorithm deducing how much you can pay" from taxi driver looking at your face and setting their meter accordingly to their feeling of how much you can pay? Is this legal?

FireBeyond• 7 years ago

Nothing, which is why taxi metering is set by the city/state, so it can't be altered (legally).

saberience• 7 years ago

Except that cab drivers randomly setting their meters isn't a thing in any of the cabs I've ever been in, and I've lived in both NYC and London.

OrgNet• 7 years ago

Amazon shows different prices to different people already... I sent a link to someone and stripped the tracking bit, and it was $10 cheaper for him

ajross• 7 years ago

I get the privacy angle, but I'm failing to see the practical argument here.

A policy like the one you're imagining would have the effect of punishing those individuals who are willing to pay premiums and unwilling to "shop around" or use alternative services.

That is, it is a policy that in practice rewards the frugal and the poor at the expense of the wealthy and spendthrift. Is that... a bad thing? It sounds like a good thing to me.

pentae• 7 years ago

Exactly. How is this not a tech version of the scam taxi drivers you encounter when traveling overseas who refuse to use the meter and try to charge you a fixed fee thats 5-10x more than a local would pay.

Charging different customers different prices for the same fare should be illegal.

mark_l_watson• 7 years ago

I don’t like differential pricing based on personal data either. It may not be true, but I have read references to Amazon doing this: different prices based on your history. I prefer now to enter Amazon on a private browser tab and then login when I see a price. There is no way to do this with an Uber or Lift app.

brokenmachine3• 7 years ago

Hypothetically could I open a restaurant where someone at the door made a judgement call on how much a customer could afford, and changed the prices for them on that basis?

That sounds like something discriminatory that should be illegal to me.

windexh8er• 7 years ago

Rideshare can be profitable for everyone just like Craigslist is. The problem is that Uber and Lyft decided they were large enterprise with a SMB profit model. You could gut 80% of either and if all you had left was drivers making good wages and the service fees for using the app to support the backend you'd be sitting in a lucrative spot. Yet both companies jumped in way too far and way too early. R&D at Uber hasn't delivered and they've continued to burn cash. WeWork, Uber, Lyft - all built on a greed model. Most drivers that I've talked to in the last few months complain how their pay stays the same or goes down and the ride prices continue to increase. These companies are like cancer: just there to take as much as they can and hopefully steamroll the real drivers that bootstrapped them into autonomous ride services. If Uber/Lyft fail someone else will come back around to pick up the key pieces that can work. But for now your "cheap rides are over" - because Uber and Lyft have decided that is the answer to the problem they've created.

neffy• 7 years ago

Don't know why you're getting downvoted - this is exactly the correct analysis - the only missing part of the jigsaw is the pension crisis that will get triggered, when the investors in that sector don't get the returns they've been promised.

hdlothia• 7 years ago

I'm fine with paying taxi prices with uber and lyft experience. The taxi experience was awful. Spotty acceptance of debit cards, racism, half truths from dispatch. They were insulated from innovation for so long

alkonaut2• 7 years ago

It's poor competition. In cities where there is a free taxi market Uber is just like every other taxi company (so every taxi company has apps for booking, has nice cars, has pre-payment etc). In cities with medallion systems or other artificial monopolies, you aren't going to get that.

RaceWon2• 7 years ago

It would not work in some areas due to the collective demographical mindset: having said that; Uber simply does not utilize a very obvious solution that would Greatly increase revenue without raising fares for riders.

Insofar as what they burn on being the peeps that figure out self driving cars... I mean that's looking to hit the sweepstakes. Chances are They won't be the ones to cash in that particular ticket.

RaceWon2• 7 years ago

Uber simply does not utilize a very obvious solution that would Greatly increase revenue without raising fares for riders.

Downvoting me??...

1) Stop making the ride App free. Charge $2.99 payable with the first ride.

2) Stop letting people sign up to drive for free. Charge $9.99 to sign up.

3) Start UberPay... sell prepaid rides for a discount then Lend that money out via Uber Credit Cards to select peeps--> like the drivers.

4) No shot I'd share this idea. This is One is The Obvious idea I mentioned in my Parent post.

Cheers

carfacts• 7 years ago

“We are focused on improving profitability in this market.”

Seems like some kind of collusive price signalling announcement to Lyft. Eg, “we’re going to up our prices, here’s your chance to do the same”.

paxys• 7 years ago

Honestly, it's probably for the best. Over the last decade it has become the expectation that - at the tap of a button - a taxi will appear and take you across the city (or three blocks over) for a few bucks. People need to realize that this isn't reality. The entire industry has been subsidized by VCs and desperate drivers working below minimum wage since day 1.

If, after paying drivers fairly, complying with local laws, reaching profitability etc., we find that prices are where most people can still afford to take Ubers everyday - great! If not, well, that's how things have been for ~150 years. Keep urging your city to invest in public transit and bike lanes.

altmind• 7 years ago

From what I've heard, this industry works reliably in Eastern Europe and Asia.

Uber, or any company of this sort is not magical lifestyle company, its merely an app for a driver and a rider. This is easily replicated.

Uber became a poster child only because the barrier to enter is so high in so many western economies. There is a ton of smaller competition elsewhere.

bobthepanda• 7 years ago

It doesn't work too well in high-income countries anywhere, because cost of living is relatively high and then people don't want to pay those kinds of fares to support taxi drivers entering the industry. You don't really see this in Korea or Japan, for example. Where this kind of informal taxi arrangement happened in the US pre-Uber (e.g. New York dollar vans) it was mostly lower-income immigrant communities willing to accept a lower standard of living.

It's similar to why you don't really see, for example, maids in middle class homes in high-income countries, but those are relatively common where wages are lower.

tessting• 7 years ago

I don't understand why it's a moral imperative that people not take advantage of the VC funding subsidy? The VCs are wealthy interests looking to find a 10-20-100x exit at the end of this. I don't care if the Saudi Royal family places an enormous bet on automation over the next 10 years. Why is it for the best that all the people who use Uber not have that? I just don't understanding cheering that one of the few subsidies that is tricking down is being phased out, and I disagree with the suggestion that any of this is driving toward the end of paying drivers more.

lifty• 7 years ago

Because it puts out of business other legitimate businesses which can’t access cheap money but that would otherwise be profitable. It can lead to a situation where a company becomes a monopoly, and at that point it can take advantage of the consumer.

chadlavi2• 7 years ago

Few bucks? You ever taken a Lyft or Uber between boroughs in New York?

drdeadringer• 7 years ago

I have had occasion to call a taxi home after public transit has shut down [a decision I made myself knowing consequences].

When I expressed what the general cost was to my [rather cheap] parent who still lives in 1973, he was astounded. "Why are you shocked and horrified? $45 is a good deal for a 1am taxi at that distance. I cannot believe you've suddenly forgotten about inflation. If you want 1973 taxi prices, go back to 1973 or do an uber."

It appears that a latter part of my quip shall become null and void in a near future.

gamblor956• 7 years ago

This policy has actually been pretty great for me. Ubers that once cost $4-5 started costing $10-$15, so I started walking and taking public transportation more.

Actually ended up getting to places faster than taking Uber, since I didn't end up waiting 10-15 minutes for the Uber to work its way through traffic to me, or the extra 10-15 minutes taking an Uber would entail due to drivers missing turns or getting lost (despite having a phone providing directions right in front of their faces...).

Invictus0• 7 years ago

I'm having trouble articulating my thoughts about this. Here we have 2 companies losing many hundreds of millions of dollars per month, and everyone here is losing their minds that they want to raise their prices. Price discrimination is just the market side of progressive taxation: everyone agrees that the rich should pay more, but not when it comes to cab fares? If you don't like the price, don't pay it: Uber v. Lyft is a false dichotomy anyway and ignores all the other cabbies in the market.

awinter-py• 7 years ago

If two companies that have been operating at a loss for N years simultaneously stop, is it price collusion?

There are lots of factors here that could drive a decision to raise prices: both went public this year = increased scrutiny, moviepass & wework fiascoes = decreased tolerance for bad business models, driverless experiments have failed.

But it also feels like there's a wink happening.

If the DOJ / courts takeaway is 'yes it's collusion and they're getting slapped with a company-killing fine', it has interesting implications for the ability of unicorns to operate at a loss for long periods.

Effectively banning negative unit economics for large companies would be a new chapter for the startup economy.

taytus2• 7 years ago

The day cheap rides are over is the day that uber and lyft are over.

randyrand• 7 years ago

And walking everywhere will become the norm?

taytus2• 7 years ago

Not necessarily, cheap rides are the only competitive advantage both of them have.

More and more companies without the massive VC support Uber and Lyft have will pop up fragmenting the market.

enraged_camel• 7 years ago

Most taxi companies were still in business the last time I checked.

jrobn• 7 years ago

This just feeds the blackmarkets for any industry. When people get wise they turn to the black market.

bad_user• 7 years ago

I'm from Romania and a taxi/Uber ride is somewhere between $2 and $5, which is pretty cheap compared with other countries.

I used to ride with Uber and Bolt a lot, however they've been raising pricing during rush hour and I'm not stupid enough to not notice the bill at the end of the ride and these costs add up.

So several months back I stopped taking car rides altogether. I walk a lot, I don't mind walking 3 Km on foot. I ride my bike to and from work, which is actually more efficient than driving a car in this city. And now in winter due to weather I also use public transportation. I also have a driver's license and own my own car.

I'm not worrying about prices set dynamically. People can notice the bill and Uber is not competing just with Lift or taxis, it's competing with walking on foot, with public transport, with owning your own car and if their prices aren't reasonable, they won't survive.

whiskyant• 7 years ago

The minimum wage in Romania is also €446/mo or $496/mo, so ~$2.86/hr. Compare that to the federal min wage of $7.25 or California's $12/hr.

blhack2• 7 years ago

Here’s how I wish Uber pricing worked:

When I hail a ride, I say: I’m going from A to B and am willing to pay C (which Uber can recommend to me) for it.

Now if nobody responds, I increase C until they do. This way the drivers know where they are going, how much I’m paying, etc. When a driver “accepts” a ride, I see their vehicle and rating, and get to choose from the people who have accepted.

And on the other end, they bid on my ride. If I offer $20, they might ask $25 instead, and it is up to me to either accept or reject that.

I really want a system where the drivers are happy, the riders are happy, and everything is transparent and open for negotiation.

esoterica• 7 years ago

Drivers usually accept new rides while in the middle of driving though. Do you really want an army of distracted drivers on their phones participating in a complicated bidding process?

ghaff12• 7 years ago

And, for those relatively unusual occasions where I do take Uber, I probably have zero interest in entering into an online bidding competition. And do you really want a system where you're trying to save a few dollars by getting a bid accepted by the most financially desperate drivers?

leetcrew9• 7 years ago

I definitely don't want to bid on each individual ride, but it would be cool to have a setting in the app that lets me choose between paying more for a shorter wait or waiting longer for a cheaper ride. the driver app could have a similar setting where they can adjust the tradeoff between higher fares and inconvenient endpoints.

CaptainMarvel• 7 years ago

That sounds good in theory, but it also sounds like a lot of effort!

Max_Mustermann• 7 years ago

That's how InDriver works, a fairly popular app in Latin America, originally created in Russia.

More info: https://www.businessinsider.co.za/indriver-lets-drivers-hagg...

grizzles• 7 years ago

Solidarity. Noice. Didi / Ola are still subsidizing. I can't remember the exact pitch but an Uber driver pitched me the other day on a Didi deal to install the app that was insane.

wdb• 7 years ago

Oh yeah, back to the black cabs then :)

daemonk• 7 years ago

does this work both ways? can we get cheaper prices if we are not willing to pay more and when it is not very busy.

Jedi72• 7 years ago

Hopefully this bullshit opens up a new market for digital obfustication services. Pay me $100, I will show you how to save $300/yr in Uber fees by changing your digital appearance.

thundergolfer• 7 years ago

Or we could just regulate these practices away and save the trouble. Man I would hate having to shop around for a service like that just so I can avoid being vulnerable to price gouging.

lsc• 7 years ago

inevitable. After spending the last year or two without a car at all, in part 'cause lyft and uber had started subtly raising prices, I bought a car a few months back.

I mean, I was a little sad, it was really really nice being driven everywhere... but fundamentally, I'm not quite rich enough to pay market-clearing prices to get driven everywhere. My own impression was that for the last few years, softbank has been subsidizing my own luxury rides, which was really nice! but it was also obviously not sustainable.

my own observation all along was that a lot of the price variation was "specials" - it used to be I could count on some discount several times a week. the biggest price increase I experienced, the one that pushed me to buy my own car, was seeing fewer of these.

Interestingly, now that I have a car and only use uber/lyft when drinking or otherwise away from a car, I get more discounts and specials again.

From talking to drivers, it's similar for them; a significant amount of their income consists of specials, for doing X drives in Y time period.

useful• 7 years ago

I think it is still a race to the bottom while you can get all rideshare prices in google maps.

rossdavidh• 7 years ago

I realize I'm in the minority on this, but I think both of these companies will be gone 5 years from now.

simonblack• 7 years ago

Gee, maybe it could be a good idea to order a Taxi instead of a Uber.

When the investors stop propping up Uber and Lyft, both will collapse like they've never been, leaving both investors and drivers high and dry. While the company managers laugh all the way to their banks.

ETHisso2017• 7 years ago

Prediction: this is going to lead to an antitrust investigation at some point. In fact, it may present a catch-22 from a pricing algo perspective:

a) the algos don't collude, but simply adjust driver "supply" in particular geos across each other's platforms via surge adjustments until they act like they are colluding; or

b) the algo designers try to make their algos not collude and they inadvertently use data from the other platform that is nonpublic or in a way that can be determined to harm consumer welfare.

Both a) and b) create a situation where every pricing decision by the algorithm - in every city, across every driver/rider interaction - has to be done in a way that is not collusive. All the DoJ has to do is find an anomalous pricing pattern - which isn't hard - and then pin both these companies with a fine and onerous compliance regulations. Ironically enough, this may be what kills them.

zonidjan4• 7 years ago

Surprise! Now that they've mostly killed off taxi companies, their rates will be the same as taxi companies. Who could've seen that coming? Oh wait.

cmdshiftf42• 7 years ago

One could argue, and I will anecdotally, that these companies have brought a much higher standard of service into an industry renowned for providing terrible (at best) service.

So if the outcome is that the price has fluctuated back to the norm, but the service provided is of a higher quality, then the consumer has won.

What will be interesting to see is what consequences will arise from a corresponding drop in demand when met with the normalisation of prices to the previous mean. Especially given that you can't actively chose between the drivers available to you through these apps i.e. if there's less demand, supply will likely drop to meet demand (drivers don't want to be sitting around all evening, or just doing 1-2 gigs per night), and there's no way for the cream of the crop to come to the surface amongst their competition by way of superior service and hence selective demand / consumers.

Intuitively, maybe it will result in harsher ratings from consumers (expecting better service given higher prices) which, with sufficient accumulation, may take lower quality drivers out of circulation and leave those deemed to be best in the marketplace.

zonidjan4• 7 years ago

They did not win based on their "higher standard of service", but based on their price, which was only possible due to their non-compliance with regulatory requirements.

boring_twenties• 7 years ago

The service they provide is at least an order of magnitude better than what the taxi companies used to provide, though.

arielweisberg• 7 years ago

In theory if I check both Uber and Lyft the price of one or the other should be lower since they want my business to offset their fixed costs. The price I am willing to pay Is simply the lowest price I can get for the service.

How rich I am has nothing do with it per se.

So when does it turn into price fixing when they both independently figure out how much I am willing to pay and charge the same amount?

Right now they are uncannily good at charging the same amount for the same trip. Maybe the price is already competitive?

chrismcb2• 7 years ago

Do they feel like they've put enough taxi companies out of business that they can now raise heir rates?

chadlavi2• 7 years ago

They already charge more than a regular yellow cab in New York. Hopefully this price hike will inspire folks to turn back to the cheaper local option.

Uber and Lyft Suggest the Days of Cheap Rides Could Be Over

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