Second study finds Uber used opaque algorithm to dramatically boost profits

The Guardian

3 days ago

A second major academic institution has accused Uber of using opaque computer code to dramatically increase its profits at the expense of the ride-hailing app's drivers and passengers.
Research by academics at New York's Columbia Business School concluded that the Silicon Valley company had implemented 'algorithmic price discrimination' that had raised 'rider fares and cut driver pay on billions of … trips, systematically, selectively, and opaquely'.
The Ivy League business school research – which is based on an analysis of 'tens of thousands of trips … as well as an analysis of over 2 million … trip requests' – follows a similar academic paper based on 1.5m UK trips that was published last week by the University of Oxford.
The British study found that many UK Uber drivers are earning 'substantially less' an hour since the ride-hailing app introduced a 'dynamic pricing' algorithm in 2023 that coincided with the company taking a significantly higher share of fares.
Len Sherman, the US report's author, said: 'Uber says 'we know more about driver and rider behaviour, so we can figure out who is willing to pay more [as a passenger] or accept less [as a driver]'. I'm in awe of what they have been able to accomplish.'
His report added: 'Since implementing upfront pricing, Uber has increased rider prices, has cut driver pay, has increased its take rates, and, of course, has greatly improved its cashflow during the period covered by this study.'
In 2024, Uber reported it had generated $6.9bn (£5bn) of cash during the year, up from it losing $303m of cash in 2022.
Sherman said that upfront pricing, which was introduced in the US in 2022, is the American equivalent of the UK's dynamic pricing algorithm, which has variably set pay for drivers and fares for passengers since 2023. Dynamic pricing is an iteration of Uber's 'surge pricing' that increased fares during periods of peak demand.
The Columbia paper, which focused on 24,532 trips made by a single US Uber driver, concluded that the introduction of the new algorithm allowed Uber to 'significantly increase its take rate – the per cent of rider fares net of driver pay captured by the company – from about 32% at the start of upfront pricing to upwards of 42% by the end of 2024'.
Last week's University of Oxford research found that, since the launch of dynamic pricing, Uber's median take rate per UK driver had 'increased from 25% to 29%, and on some trips … is over 50%'.
The pair of papers add to the series of controversies that have plagued the technology company over the years. They include a 2021 UK supreme court ruling that Uber drivers are entitled to the minimum wage and paid holidays, as well as the 2022 release of the Uber files, a global investigation that revealed how the company duped police and regulators, and secretly lobbied governments across the world.
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After the release of the Uber files, Jill Hazelbaker, Uber's senior vice-president of public affairs, said: 'We ask the public to judge us by what we've done over the last five years and what we will do in the years to come.'
An Uber spokesperson said: 'Uber's pricing is designed to be transparent and fair for both riders and drivers. Upfront pricing gives riders clarity before they book and allows drivers to make informed decisions based on full visibility into pay, distance, and expected duration.
'Our dynamic pricing algorithms help balance real-time supply and demand to improve reliability across the platform. Upfront prices are not personalised – our pricing algorithms do not use information about an individual rider or driver's personal characteristics. Suggestions that our systems manipulate pricing unfairly or discriminate are simply false and not supported by evidence.'
Last week the company said: 'We do not recognise the figures in [the University of Oxford] report.' It added: 'Every driver is guaranteed to earn at least the national living wage.'