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Uber's "Route-Based Pricing" Predicts How Much You're Willing to Pay

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Re: Uber's "Route-Based Pricing" Predicts How Much You're Willing to Pay

#11

Post by noonespecial »

jessriedel wrote: post #10
noonespecial wrote: post #7

Its funny. When I first started using Uber, every time I took a ride and paid the fair its was almost a joyous experience to pay what seemed like so little. It made me want to use Uber for all sorts of trips and tell everyone else to do the same. Now every time I open it, it feels like just a liiittle too much to use for anything but a very occasional trip. They get more from me for each trip I now almost never take.…

They were losing money on you before by subsidizing your ride. Now their price better reflect the actual economic costs, and it's not surprising that this means you don't take a taxi as often.

Doesn't seem like we can know that for sure without knowing their complete costs per ride. Even at the higher price that might still be true. It might not.

What we do know is that the algo isn't based on their cost, its trying to figure out the max it can charge me and "get away with it". I'm suggesting that its time horizon is much too small. It was enough to chase me away. That might be what they wanted. It may not be.

Re: Uber's "Route-Based Pricing" Predicts How Much You're Willing to Pay

#12

Post by gsch »

> “Society is more willing to accept wealthy people paying higher fares,” said Chris Knittel, a business professor at the Massachusetts Institute of Technology. “But if the repercussion of lower fares in lower-income places is longer wait times, that’s probably what they want to keep an eye on."

I can't help but recall all the times Uber or its defenders claimed that its supposedly uniform fare scale meant that it could serve all neighborhoods equally, unlike the taxi companies. It will be interesting to see if this policy reproduces the same behavior while laundering it through machine learning.

Re: Uber's "Route-Based Pricing" Predicts How Much You're Willing to Pay

#15

Post by r00fus »

acchow wrote: post #6
gshulegaard wrote: post #4

Earlier quoted context omitted.

It leads to consumer surplus being further and further converted into supplier surplus. Ultimately, this trend will approach 100% conversion so that there is no more consumer surplus and all surplus is realized by producers. It is an interesting sort of economic reality to speculate about...but I don't really have enough background to even credibly start.

You're ignoring the existence of competition...

Cartels and monopolies easily evade competition. And evasion of anti-trust is now just another business expense.

Re: Uber's "Route-Based Pricing" Predicts How Much You're Willing to Pay

#16

Post by sebleon »

The flip side is that they can also predict what's the minimum pay an individual driver is willing to take.

The airline industry has been doing personalized pricing for years - if you don't believe me, redo a flight search in incognito mode. It's interesting how Uber's other transgressions have place a magnifying class over all their other activity.

Re: Uber's "Route-Based Pricing" Predicts How Much You're Willing to Pay

#17

Post by BurningFrog »

gshulegaard wrote: post #9
acchow wrote: post #6

Earlier quoted context omitted.

You're ignoring the existence of competition...

Not really, competition only checks this effect if the price-discrimination advantage isn't so compelling such that: 1) All firms start doing it...because what Producer wants to leave money on the table? 2) The firm that does it best gains a significant advantage over competitors thus leading towards non-competitive market conditions. And, from a purely speculative perspective, if the price discrimination advantage w…

Let me try to demystify what we're talking about, and show competition works fine even in this scenario.

Let's say a ride is worth $20 for the consumer and $12 for the producer, for a total surplus of $8. If the price they agree on is $14, the consumer surplus is $6 and the producer surplus is $2.

If the producer can be sure the consumer values the ride at $20, they can charge $19 and take home most of the surplus.

Now lets introduce a competing producer, which is equally competent and can also figure out all this.

By your "what Producer wants to leave money on the table?" theory, they would also charge $19, and maybe get half the market that way.

But obviously they could also charge $18, get all of the market, and make a lot more money. Producer 1 will obviously retaliate and prices will go down.

Re: Uber's "Route-Based Pricing" Predicts How Much You're Willing to Pay

#18

Post by sebleon »

gsch wrote: post #12

> “Society is more willing to accept wealthy people paying higher fares,” said Chris Knittel, a business professor at the Massachusetts Institute of Technology. “But if the repercussion of lower fares in lower-income places is longer wait times, that’s probably what they want to keep an eye on." I can't help but recall all the times Uber or its defenders claimed that its supposedly uniform fare scale meant that it co…

Interesting, I hadn't heard that defense before. It seems like Uber's app-based hailing is the reason why poor neighborhoods are able to get serviced.

Previously, no taxi driver would drive around in those areas - because of opportunity cost of higher fares in richer areas, and fears of getting robbed when there was tons of cash in the car.

Re: Uber's "Route-Based Pricing" Predicts How Much You're Willing to Pay

#19

Post by maxerickson »

gshulegaard wrote: post #9
acchow wrote: post #6

Earlier quoted context omitted.

You're ignoring the existence of competition...

Not really, competition only checks this effect if the price-discrimination advantage isn't so compelling such that: 1) All firms start doing it...because what Producer wants to leave money on the table? 2) The firm that does it best gains a significant advantage over competitors thus leading towards non-competitive market conditions. And, from a purely speculative perspective, if the price discrimination advantage w…

Isn't the way they gain advantage by having the lower price?

(so riders with options will not choose the fair with a larger supplier surplus)

The reason they invest in the technology is because they are able to utilize it across enormous numbers of fares.

Re: Uber's "Route-Based Pricing" Predicts How Much You're Willing to Pay

#20

Post by vkou »

sebleon wrote: post #16

The flip side is that they can also predict what's the minimum pay an individual driver is willing to take. The airline industry has been doing personalized pricing for years - if you don't believe me, redo a flight search in incognito mode. It's interesting how Uber's other transgressions have place a magnifying class over all their other activity.

I've just done a few Google searches for flights (SEA to SFO, LAX to NYC) while logged into two different google accounts, as well as Incognito mode. All the quotes were the same.

I saw the same result on google.ca, and google.co.uk (When adjusted for exchange rates.)

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