Uber sentences to ponder

Uber seems to be moving to a system where some rides cost more than others, even in the absence of surge pricing:

An Uber spokesperson assured Axios that pricing has nothing to do with a rider’s perceived level of income, past rides, or any individual characteristics.

So far only for UberPool in limited locations, I also am interested in this as a test of whether social media can strike down price discrimination.  What will the prices be contingent upon?  Traveling to a starred Michelin restaurant?  Why then use UberPool?  Here is further (but still incomplete) information, and yet more here.  How long will it take people to figure out the implied rules for contingent prices?  Are we these days capable of accepting any such rules as fair?

The pointer is from Matthew Kahn.

Comments

I have made it a practice of bouncing back and forth between Uber and Lyft and regularly refusing surge fares to take taxis. I get regular discount emails and special offers from both providers and I rarely get surge/primetime fares anymore unless it's pouring rain at rush hour.

Anecdotal with no evidence of their actual processes, but it's fun to pretend I'm outsmarting them...

If you're an iOS user, both apps integrate with Apple maps so you can see wait times and prices side by side for all services

If healthcare providers and suppliers can charge different prices to those insured that to those uninsured, why can't Uber?

http://teawithft.blogspot.fr/2009/06/but-there-is-minimum-minimorum-reform.html

Or is it someone will soon sell us insurance against being charged more than others?

I believe the rates depend on contracting. Same insurer may pay different rates to different doctors depending on the negotiationed payment. Doctors in large groups have more negotiating power.

That being said, doctors don't charge more when they are busy. They don't surge price medical services. Imagine if you were very ill, say with appendicitis, and the surgeon said she was really busy and wanted to surge price for her surgical services.

Medical services are already surge priced. People don't submit to surgery unless they really need it.

> People don’t submit to surgery unless they really need it.

Cosmetic surgery is the obvious exception. More generally, quite a lot of medical services aren't needed, or can be delayed with very little risk. Some people visit the dentist every six months, others only every year; and some people rarely visit at all.

Uber might try to extract higher prices from those they believe richer but in this case we are talking about extracting higher prices from those who have no insurance... and that is really not the same

If you actually take into account true economic costs (e.g., opportunity costs), then you can argue it is. When things are busy you have to wait 4 hours in the emergency room before you get care vs. 15 minutes when things aren't busy. That's a big cost difference!

'Uber seems to be moving' to being run over by surging legal problems.

Uber and autonomous cars are just transit by another name, privately owned and operated transit. It seemed like such good idea, better than public transit because it would be "efficient". As we have learned in health care, private insurance can be "efficient" too, bilking Medicare out of billions all the while making executives at the insurers wealthy. https://www.nytimes.com/2017/05/19/business/dealbook/unitedhealth-sued-medicare-overbilling.html Now that Uber has been exposed as perfidious as private insurers, does this mean that Cowen is reconsidering his support for privately owned and operated transit? Let's not be fanciful.

The net public good of the introduction of Uber and Lyft seems to have escaped you. Never mind that it is enormous. That you see Medicare waste/fraud as a problem with private rather than with government healthcare--this, too, is rich.

I use Uber and it's great. But I understand where this is headed, namely autonomous cars. And for autonomous cars to work, they will need a separate right of way; otherwise, they'd be limited to about 30 mph (so sayeth the Google engineers). Who will pay for the separate right of way. Uber? Don't be ridiculous. The public pays the costs and Uber collects the revenues. It's a perfect public-private partnership. Just like Medicare Advantage.

You just lived through a century of Chevy and Ford selling automobiles while tax money paved the highways. Did that offend you?

'while tax money paved the highways'

Actually, in the U.S., the interstate system was mainly financed with a tax on fuel - that is, someone living in NYC paid little tax money for highways, while someone living in an outer Northern Virginia suburb driving to the Pentagon paid quite a bit.

It's almost as if you're saying tax money paved the highways.

Or I am actually saying those that used the roads paid for them, which is the actual case concerning the U.S. interstate system of highways.

People who do not own a car only pay for the highways to the extent that the products they buy which have been shipped over highways includes that cost of using the road as part of the price. However, a normal, non-car owning denizen of NYC is not paying for interstate 95 through taxes (in the main).

If it helps, the French highway system is completely toll based at this point - but since this is an American web site, why bring up how the French don't use taxes for their highway system at all. Unless one considers a toll a tax (most Americans would, as there are very few private toll roads in the U.S.) - after all, you cannot drive on a French highway unless you pay. Which is pretty close to the case in the U.S., though electric autos will likely require a change in this financing system - electric car owners are free loading, essentially.

On the other hand, limiting speed to 30 mph would greatly improve energy efficiency. You'd spend much less energy pushing all that air out of the way. Slower speeds would be acceptable in a driverless vehicle, because you'd be reading the newspaper or Facebook or something. Whoops, I'll have to cut this comment short. I'm here.

Indeed, as someone who uses drivers a lot, its much easier when traffic is heavy and speeds are slow to be able to work. And often I have been sat in my driveway finishing a call or email.

Most of the area that public transit serves has speed limits of about 30 mph anyway. so there is no need for a separate right of way in those places. There is plenty of time to improve technology before those markets get saturated.

My motorcycle is on the fritz so I've been using Uber Pool for the last week. It's so convenient and cheap that I sort of forgot about fixing the motorcycle. The situation with taxis five years ago would've made this inconceivable.

(trigger warning!!) As a side note, drivers are disproportionately black in my city. These rides have been a reminder that, whatever the appearance of race chaos on the internet, people in the real world tend to get along alright. I would note also that I feel much more simpatico with these drivers than I do with the black people I encounter at TSA, DMV, or the like. I feel there's some argument for private markets in there.

It's because of the psychological effect of unionization?

I can see a lot of relevant factors: monopoly, government job security, government hiring, and yes a union mentality. If TSA and DMV employees faced customer ratings as Uber drivers do, those edifices would vanish in smoke.

And if Uber's drivers had to face the same hostility from some of the public that TSA or DMV employees do, it is possible they could just ban them from ever using Uber again.

China allows you to rate your immigration official as he does your passport.

I think they have a flawed system because its done before you're allowed through, which means most people don't dare do it.

Actually, you cannot rate the immigration official until after they have keyed in the decision in the system.

+1

In my city, the drivers are very diverse but they all seem very conscientious.

They also almost never have a bad thing to say about Trump. At first I was surprised, but no longer.

Also, these aren't the zmp workers Tyler is talking about. Uber won't help them either.

I am flabbergasted by your failure to fix the motorcycle. You can still take uber when your date fears motorcycles or you fear rain or any number of other reasons. Not fixing the bike is unacceptable!

You speak truly. I've just been watching videos of taking a carb apart and I'm not emboldened.

Price discrimination is a terrible thing, say some people reflexively, when it is done voluntarily by private entities to willing customers that consensually pay the prices in exchange for the goods and services. When price discrimination is mandated by government under threat of criminal punishment, however --- as is the case for health insurance, education, military protection, Social Security, Medicare, and basically all government services --- then it is just the natural order of things, where everyone pays their "fair share" so that government can guarantee "equal access". Apparently, price discrimination is yet one more area where people can do whatever they want, as long as it's mandatory.

Nicely said.

Though one wonders how Social Security slipped into 'price discrimination.' Several of the others seem quite a stretch too, of course.

One does not pay a uniform amount per dollar of Social Security benefits. Benefits are based on dollars contributed, but one's benefits are based on 90% of contributions up to a first threshold, 32% between the first and second thresholds, and 15% above the second threshold. It's equivalent to selling annuities at different prices based on income.

The higher one's income, the more one pays for the same Medicare insurance policy, which is the definition of price discrimination. All government services paid for with income taxes also have the property that, the higher one's income, the more one pays for the same services. K-12 education price discriminates based on home property values, and college education price-discriminates with need-based financial aid. There is no "stretching" in any of the examples.

'One does not pay a uniform amount per dollar of Social Security benefits.'

One pays a uniform percentage - seems a stretch to call that price discrimination. If everyone pay a 5% sales tax, it is certainly true that a person buying a 10,000 dollar car pays less sales tax than someone buying a 100,000 dollar car - I don't think anyone considers that price discrimination, however.

'The higher one’s income, the more one pays for the same Medicare insurance policy, which is the definition of price discrimination.'

I was thinking the military as an example, but again, but when I worked for the Commonwealth of Virginia, I seem to recall paying less for Kaiser Permanente's HMO than someone who earned more than I did - 30 years ago, admittedly, and perhaps falsely remembered.

'There is no “stretching” in any of the examples.'

You still left off the military, and seem to ignore the fact that children, who receive any number of services, don't pay any taxes at all.

Machine learning (which Uber is very good at because they have extremely smart engineers) is going to make this extremely common in the near future. Not sure if it's a bad thing or not. It's certainly a way to combat "inequality" without getting the government involved - basically a private sector tax.

yes, and it's a very simple transaction: you ask for a quote, Uber gives you one, and either you accept it or reject it. Personally I always have alternatives available to me - if the only option was Uber, then variable pricing might be more of a threat.

Amazon charges higher prices if you use an Apple computer instead of a PC, so it would make sense for Uber to charge more if you use an iPhone rather than some flavor of Android. I suppose a Chinese-brand Android might be even lower than a Samsung.

Source? Not sure how Amazon would know that other than a User Agent string (which can easily be spoofed) or shopping history for Apple accessories.

'how Amazon would know that other than a User Agent string'

Actually, a number of ways, a good explanation is found here - https://security.stackexchange.com/questions/107213/identify-unique-computer-through-tracking For the record, I don't normally use javascript, java, flash, turn off images and cookies, but don't bother to spoof the MAC or scramble the browser fingerprint (available fonts or languages, for example - https://panopticlick.eff.org/ ). As noted at the end, avoiding advertisers or other trackers is one thing. However there is a next level, which google, facebook, uber (remember that uber uniquely tracks iPhones even after their app is wiped, with the apparent blessing of Apple to violate Apple's terms of service) represent. Still avoidable with effort, though mainly by avoiding their services completely. Then there is the level above that, where anyone too concerned about privacy attracts attention.

You are such a horrible poster and this is a great example of how you have no idea what you are talking about.

None of the ways mentioned in that SE post would allow Amazon to identify Apple users vs. Windows/Linux users OTHER than browser fingerprinting (i.e. User Agent strings). Scrambling your MAC address does nothing because dataframes are updated with a new MAC address at every hop.

However, to answer my own original question, p0f allows passive OS fingerprinting based on protocol analysis. (https://github.com/p0f/p0f). Pretty cool tool.

'would allow Amazon to identify Apple users vs. Windows/Linux users OTHER than browser fingerprinting'

Well, apart from that. And using Flash. And using Java. As noted in the article. (Adobe is never your friend when it comes to privacy - or security.)

Leading to the question did you even bother to actually read it? Admittedly, it actually was concerned with identifying a system behind a VPN - the point about the MAC being relevant in that area.

'Scrambling your MAC address does nothing because dataframes are updated with a new MAC address at every hop.'

Kind of - see the point about Java above. Or get some sample Java code here - https://stackoverflow.com/questions/11884696/how-to-get-machines-mac-address Java is a big gaping hole that reaches (pretty much out of necessity) deeply into a system.

And that point in the original article about using a VM? Pretty much ruins the tool you have listed. But here is the output from that tool concerning my system -
'Detected OS = Linux 3.11 and newer
HTTP client = Firefox 10.x or newer (User-Agent string seems legit)
Network link = unknown
Distance = 11
Language = English
Uptime = 0 days 0 hrs 58 min (modulo 198 days)

The uptime is pretty good though - this opensuse Leap 42 laptop runs off a solar system, and gets powered down when I'm gone for a few hours. However, these days, Seamonkey just isn't all that like Firefox anymore, though that likely explains the Firefox 10.x or newer. On the other hand, it does seem as if the disclaimer would appeal to many of Prof. Cowen's most loyal commenters - 'Especially if you are seeing a dramatic mismatch (e.g. Windows misidentified as Linux), it's fairly unlikely that p0f is wrong.'

Amazon tried naked price discrimination briefly, years ago. The public noticed quickly. They stopped. Now that they run a significant business in selling price data to third party vendors on the platform, I'm not sure how they could easily go back. Apparently price transparency can be a product.

I remember that. I'm no expert, but I think this is a great way to destroy your own business - which is why AMZN backed down. People tolerate price discrimination based on some factors (e.g. airfares based on advance purchase), but once you start discriminating based on trying to figure out how much a particular buyer will pay, I think you're playing with fire. It may not be rational, but as a big buyer on Amazon and of Uber, in either case, once I learn that they are trying to game me, if I don't understand the rules of the game, I fold and do something else. I think it just offends people's sense of fairness. Generally, store = everyone pays the same price at the same time (sales and coupons understood). There are exceptions where people know to haggle (e.g. cars), and I don't mind haggling.

I don't think this is too hard to figure out. For most of your daily transactions, the cost to you to price search is way higher than it is for a vendor using automation. And so you know that if a vendor is doing this you are going to pay higher prices on average. So the only good strategy is to stop using that vendor. We rely heavily on the notion of a public market for goods driving relatively efficient prices. And that is most of the benefit offered by Amazon - low prices/margins. The other part is convenience, but it is not enough on its own.

>An Uber spokesperson assured Axios that pricing has nothing to do with a rider’s perceived level of income

Thank God, what a relief. Only the Government should be able to do that.

I haven't used Uber in awhile. As I recall, it already offers different tiers of service, priced accordingly.

It's a timely post.
Last week we noticed price discrimination in Uber Bangalore.
My son and me were next to each other. We were looking for an airport drop. Mine showed ₹1100. My son next to me showed ₹600. We compared, both were Uber go.
Since we were in a hurry we didn't capture screens. Now that this post has come I will look for this.

My first thought is honestly who cares.

I'll pay a few extra bucks to keep the service around.

These sort of takes the place of tipping, which rich people probably do more of.

If Uber really wanted to price-discriminate by income, it should consider the higher education model: start an Uber Foundation to provide need-based "financial aid" to low-income riders, say in the form of Uber vouchers. With customers voluntarily submitting their personal financial information to the Foundation, Uber would not need to develop sophisticated learning algorithms. Some might even be so impressed by Uber's "philanthropy" that private charities and government might even start contributing "aid", allowing Uber to receive subsidies in addition to price-discriminating. (Note: subsidies to low-income customers that, in turn, pay the subsidies to Uber or a college are equivalent to a subsidies to Uber and the college, respectively.) Uber Foundation's mantra could be that no one should ever be denied transportation due to income; transportation is a basic human right.

All these while investors subsidize 50-60% of costs of every ride for the sake of growth.

Uber has been fun, how long will it last?

It will last as long as regulations artificially limit the supply of taxi drivers, the main regulation being that a taxi driver obtain one of the artificially limited number of taxi medallions.

This is about Uber, not taxi medaillons. From the 3rd link.

"The difference between the calculations of rider fares and driver pay could be the future of Uber’s business. The company said it pockets what’s leftover and could parlay this mathematical framework into moving closer to profitability."

Profits were expected after company growth, today it's a large business operation with consistent loses. This is an insane race to the bottom: taxi companies lose, Uber investors lose, drivers lose..........all because of the mirage of "profits come after we become huge".

All these while investors subsidize 50-60% of costs of every ride for the sake of growth.

It's really sad to see this meme keep on popping up on an economics blog. Uber has a positive gross profit, ie they make money on every ride.

If they were really subsidizing 50% of each ride, me and my buddy could simply fake ride with each other all day to extract money from Uber.

'me and my buddy could simply fake ride with each other all day to extract money from Uber'

Not if you have an iPhone. Uber keeps track of them, in violation of Apple's terms - 'Uber hid its fingerprinting of iPhone users from Apple – techniques that would have had any other app thrown out of Apple's store. Uber retained the information even after the Uber app had been deleted and the phone had been wiped. Uber CEO Travis Kalanick got a personal reprimand from Apple CEO Tim Cook, but the app stayed put, and Uber continues to use fingerprinting worldwide.' https://www.theregister.co.uk/2017/04/24/uber_cloaked_its_spying_but_apple_gave_it_a_wrist_slap/

Stop pattern patching and start reading.

How can they make money on every ride and lost 2.8 billion on 2016?

Perhaps Uber's head of finance has the answer: "Subsidies for Uber's drivers are responsible for the majority of the company's losses globally, Gupta told investors..." https://www.bloomberg.com/news/articles/2016-08-25/uber-loses-at-least-1-2-billion-in-first-half-of-2016

How can they make money on every ride and lost 2.8 billion on 2016?

This is an economics blog, so I expect people understand accounting a little. Maybe I'm overestimating the intelligence here.

Gross profit can be positive while the company loses money. Imagine a grocery store that buys bread for $1 a loaf and sells it for $2. It moves 10,000 a month and has rent/salary of $12,000 a month. It makes money on every loaf it sells but still is losing money.

This is entirely different than a store that buys eggs for $1.10 and sells them for $1. Both stores lose money and need to change something to continue operating in the long term, but the first store has many more options available. Moving an extra 20% a month would cover things. The second store may not be salvageable in any fashion.

People regularly accuse Uber of being the second store, even though every leaked document of Uber's financials show positive gross profit, ie they are the first store.

You've grossly have overestimated your own intelligence. Uber is a money pit that'll disappear in under a decade.

2 more years.

That's it.

Isn't the most logical issue to set prices on is the likelihood of picking up another ride close to the destination? My guess is that your marginal cost to Uber and the driver is based in part on how many minutes the driver will have to go before getting the next ride.

If so, then there's a good chance the effect will be racially discriminatory in some areas, and it will leave fixed fee services like taxis even more disadvantaged as Uber offers even more attractive prices to the most profitable rides.

Another possibility would be to have the fare vary based on the length of ride (I had a friend Uber 2 blocks to avoid the rain - on a per mile or per minute basis, her contract was presumably much more expensive than most, given that the driver had the same costs at both ends to drive to pick her up and to drive to the next fare, although if Uber has a "meter drop" component, maybe it already does this.

You could also base the fare on the driver's preference of where to go. (My last driver in Stanford Connecticut needed to get to LaGuardia later that day for his day job - I imagine he'd love a system that let him pick up fares that moved him towards his ultimate destination as long as it stopped in other areas he'd be likely to pick up fares.)

You have to remember that Uber is still losing money. They are trying to innovate on pricing so that they can stay in business. We should applaud their efforts while keeping an eye out for the best deal for ourselves (without government interference).

The best case would be for government to keep out, which would allow a 3rd competitor to emerge at some point. Magical things tend to happen when a 3rd competitor appears in a market.

There are third options in some markets -- some parts of DC now have Via. Operates like UberPool but with limited geographic range. In SF there was something called BridgeWay a few years back. More of a roving vanpool? (Anyone else recall this?) "Me Toos" have the issue of being perceived as off-brand and having to price that way, though.

Between this and the Pittsburgh story and other things I sometimes get the impression that the people running Uber are too clever for their own good.

I think it's a good idea and I've used it, though lately I've used Lyft more, but the bad behavior is annoying.

Uber would do well to remember that they're not a monopoly yet.

I don't get how Uber could possibly get a monopoly. They don't have serious lock-in. The biggest problem is building up a big enough driver network in each town that riders feel confident they will get a ride. And the hardest part of that is setting up the first network. People can easily drive for multiple services simultaneously.

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