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Uber Starts Charging What It Thinks You're Willing To Pay (bloomberg.com)
An anonymous reader quotes a report from Motherboard: Uber drivers have been complaining that the gap between the fare a rider pays and what the driver receives is getting wider. After months of unsatisfying answers, Uber is providing an explanation: It's charging some passengers more because it needs the extra cash. The company detailed for the first time in an interview with Bloomberg a new pricing system that's been in testing for months in certain cities. On Friday, Uber acknowledged to drivers the discrepancy between their compensation and what riders pay. The new fare system is called "route-based pricing," and it charges customers based on what it predicts they're willing to pay. It's a break from the past, when Uber calculated fares using a combination of mileage, time and multipliers based on geographic demand. Daniel Graf, Uber's head of product, said the company applies machine-learning techniques to estimate how much groups of customers are willing to shell out for a ride. Uber calculates riders' propensity for paying a higher price for a particular route at a certain time of day. For instance, someone traveling from a wealthy neighborhood to another tony spot might be asked to pay more than another person heading to a poorer part of town, even if demand, traffic and distance are the same.
Orbitz started doing this in 2012
I think that they've been doing that for a while.
Yeah, but the thing here is that while Uber's profit margin is really their own business, and they can charge what they like, they actually have a negative profit margin: the drivers are paid *more* than what the company is taking in from riders (at least, that's what I keep reading). That's not sustainable. But that's between Uber and their silly investors.
The customer has the right to know how much it will cost before the transaction occurs.
Taxis don't do that. Why should Uber? At least Uber gives you an estimate, but the final price can depend on traffic delays. I don't use Uber, but Lyft estimates are usually accurate.
Yes, they do. Your taxi has a set rate for every mile driven, a set rate for every minute of waiting, and a set rate for any addons like baggage etc.