A prominent academic institution has accused Uber of utilizing opaque software algorithms to significantly boost profits while negatively impacting drivers and passengers using their ride-hailing platform.
Research conducted by scholars at Columbia Business School in New York determined that the Silicon Valley company has adopted a systematic and selective approach to “algorithmic price discrimination,” which “raises rider fares and severely diminishes driver earnings to the tune of billions.”
The Ivy League Business School’s findings are based on an analysis involving “tens of thousands of rides… amounting to over 2 million…” travel requests, and it builds upon a recent study from the University of Oxford concerning 1.5 million UK trips published the previous week.
The UK research revealed that many Uber drivers in the UK have reported “substantially reduced” earnings since the introduction of the “dynamic pricing” algorithm in 2023, correlating with the company capturing a significantly larger share of fare revenue.
The US report, authored by Len Sherman, highlights that as a passenger, acceptance appears less favorable, while he expresses amazement at what has been accomplished.
Sherman’s report remarked: Reducing driver payments while enhancing their take rate significantly contributes to improving cash flow during the study’s duration.
In 2024, Uber announced that it had generated $6.9 billion (£5 billion) in cash for the year, a stark contrast to their loss of $303 million in cash in 2022.
Sherman noted that the advanced pricing introduced in the U.S. in 2022 is akin to the UK dynamic pricing algorithm implemented in 2023, significantly affecting passenger fares.
Columbia’s study, which examined trips made by 24,532 U.S. Uber drivers, concluded that the new algorithm has “modified the distribution of net rider fares among driver incomes.”
The recent Oxford study found that following the rollout of dynamic pricing, Uber’s median take-rate per driver surged from 25% to 29%, with some trips exceeding 50%.
These findings contribute to a growing list of controversies surrounding technology companies, including a 2021 UK Supreme Court ruling affirming that Uber drivers are entitled to a minimum wage and paid leave, along with the 2022 disclosure of the Uber Files, a global investigation revealing the company’s efforts to bypass police and regulations while secretly lobbying governments worldwide.
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Following the release of the Uber Files, Jill Hazelbaker, Uber’s Vice President of Public Relations, stated:
An Uber spokesperson remarked, “Uber’s pricing structure aims to be transparent and equitable for both riders and drivers. The prepaid pricing is disclosed prior to booking, enabling drivers to make informed choices based on a full understanding of wages, distance, and expected duration.”
“Our dynamic pricing algorithms function to synchronize real-time supply and demand, enhancing the platform’s overall reliability. The prepaid pricing model is not personalized, and our pricing algorithms do not utilize personal information from individual riders or drivers.”
“Last week, the company reiterated: [the University of Oxford] Report. All drivers are guaranteed to earn at least the national living wage.”
Source: www.theguardian.com
