Uber Is Using AI to Charge People as Much as Possible for a Ride(motherboard.vice.com)
motherboard.vice.com
Uber Is Using AI to Charge People as Much as Possible for a Ride
https://motherboard.vice.com/en_us/article/uber-is-using-ai-to-charge-people-as-much-as-possible-for-a-ride
69 comments
"not inherently evil"
The concept of the consumer surplus is the reason why capitalism is preferred over other economic systems such as feudalism or communism.
One price for all is a cornerstone of our social contract. Discarding it will place that contract in danger.
If all the profit in a trade goes to the robber barons, such trades will be rightly seen as unfair and calls for the revolution will become loud.
The concept of the consumer surplus is the reason why capitalism is preferred over other economic systems such as feudalism or communism.
One price for all is a cornerstone of our social contract. Discarding it will place that contract in danger.
If all the profit in a trade goes to the robber barons, such trades will be rightly seen as unfair and calls for the revolution will become loud.
Previous attempts at price discrimination have been transparent: senior's discounts, time or capacity based pricing, et cetera.
This is considerably different, being opaque. Once this gets out, everybody taking an Uber will have that nagging feeling in the back of their head, "was I ripped off this time?" And it'll make them think twice the next time they go to order one.
This is considerably different, being opaque. Once this gets out, everybody taking an Uber will have that nagging feeling in the back of their head, "was I ripped off this time?" And it'll make them think twice the next time they go to order one.
If someone gets the service they wanted/needed at a price they were willing to and agreed to pay, they weren't ripped off.
Really? So you wouldn't think it was unfair that they charged you more because they guessed that your workplace or your rent price based on your trips? Or because your phone battery was almost dead in a location you're not normally at?
Think about it this way: You would probably pay a hospital your net worth if you had a child and he/she was seriously hurt and taken to a hospital. B would you think leveraging this information to take more money from you be "fair?"
Think about it this way: You would probably pay a hospital your net worth if you had a child and he/she was seriously hurt and taken to a hospital. B would you think leveraging this information to take more money from you be "fair?"
No, I wouldn't think it was unfair if they presented a price that was more because of <insert some reason here>, and then I decided not to pay it because I didn't think their service was was worth that price.
If you don't like what Uber is charging you, then don't take Uber. You can consider whatever constraints you like when determining the price you're willing to pay: convenience, time, cost, cleanliness, location, whathaveyou. Maybe you value your time less than the cost of an Uber, so you can then walk to your destination. You ripped off Uber then by using your two perfectly good feet, and showed those capitalist fatcats by not even using their service!
The comparison to a serious hurt child is not an appropriate comparison (also, "think of the children!"), because the service is not fungible in that case.
Is someone going to show up and make the same arguments for why people with higher incomes shouldn't pay higher taxes? If there's nothing wrong with progressive taxation, then there's nothing wrong with progressive pricing, and the only difference is that you're forced the pay taxes while you're not forced to purchase services from any given vendor.
If you don't like what Uber is charging you, then don't take Uber. You can consider whatever constraints you like when determining the price you're willing to pay: convenience, time, cost, cleanliness, location, whathaveyou. Maybe you value your time less than the cost of an Uber, so you can then walk to your destination. You ripped off Uber then by using your two perfectly good feet, and showed those capitalist fatcats by not even using their service!
The comparison to a serious hurt child is not an appropriate comparison (also, "think of the children!"), because the service is not fungible in that case.
Is someone going to show up and make the same arguments for why people with higher incomes shouldn't pay higher taxes? If there's nothing wrong with progressive taxation, then there's nothing wrong with progressive pricing, and the only difference is that you're forced the pay taxes while you're not forced to purchase services from any given vendor.
First, you're basing your argument on a mistaken premise that progressive taxation is okay. Second, it's relatively clear that you're going to be paying a certain rate in taxes, whereas your Uber prices can now have a huge, unforeseen jump in pricing because <insert personal reason here>. It's the difference between knowing you have to pay a higher rate because you're not a "Shopper's club member" vs. having an arbitrary fee added to your grocery at checkout because you're carrying a Louis Vuitton bag.
And I'm not arguing this from a purely economics perspective. Yes, I know discriminatory pricing has its place in our society today and yes, I know it's profit maximizing, "fair," etc. But what's different here is that unlike airlines that have an algorithm deciding the same price for anyone buying that seat at that particular time, Uber can discriminate against you for very personal reasons, or general reasons that can discriminate against the racial makeup of a neighborhood, the disabled, etc.
Hats off to your sense of duty to capitalism that'd make Milton Friedman proud, but the world doesn't work like an Econ 101 textbook. If Uber's profit maximizing algorithm is discriminatory against protected classes, it's illegal. If it's profit maximizing by overcharging people lulled into usage due to habit, dying phones, etc. it's still predatory.
P.S. regarding your "think of the children" critique, I'm simply offering a direct counterexample to your "whatever price you pay and agree to == not getting ripped off." According to you, it does seem like you can be ripped off after all, even at a price you were willing to pay.
And I'm not arguing this from a purely economics perspective. Yes, I know discriminatory pricing has its place in our society today and yes, I know it's profit maximizing, "fair," etc. But what's different here is that unlike airlines that have an algorithm deciding the same price for anyone buying that seat at that particular time, Uber can discriminate against you for very personal reasons, or general reasons that can discriminate against the racial makeup of a neighborhood, the disabled, etc.
Hats off to your sense of duty to capitalism that'd make Milton Friedman proud, but the world doesn't work like an Econ 101 textbook. If Uber's profit maximizing algorithm is discriminatory against protected classes, it's illegal. If it's profit maximizing by overcharging people lulled into usage due to habit, dying phones, etc. it's still predatory.
P.S. regarding your "think of the children" critique, I'm simply offering a direct counterexample to your "whatever price you pay and agree to == not getting ripped off." According to you, it does seem like you can be ripped off after all, even at a price you were willing to pay.
I think this crucially depends on how much influence both parties have over their respective situations.
In the hospital example, if you had a choice of several hospitals at different price points and chose the more expensive one, then it is fair of them to demand the price they quoted upfront.
Likewise, if the hospital needs the money just to cover the expenses incurred in trying to save the child, the price is fair as well.
But if they have a choice and you don't, they are unfairly abusing the situation. (See also: Martin Shkreli jacking up the price on a drug exclusively manufactured by his company.)
In the hospital example, if you had a choice of several hospitals at different price points and chose the more expensive one, then it is fair of them to demand the price they quoted upfront.
Likewise, if the hospital needs the money just to cover the expenses incurred in trying to save the child, the price is fair as well.
But if they have a choice and you don't, they are unfairly abusing the situation. (See also: Martin Shkreli jacking up the price on a drug exclusively manufactured by his company.)
Haven't you heard anybody rant for hours about how gas stations raise their prices on the weekends, or some sort of similar rant?
People act very emotionally to the idea that someone else got a better deal than they did.
People act very emotionally to the idea that someone else got a better deal than they did.
Yes, and those people didn't get ripped off, they are just uninformed ranters. They could have just as well purchased their gas at a low-price time, especially since they KNOW (proven by their ranting) the prices change.
It could just as well be that the "higher, weekend" price is the "normal price" and the weekday price is the "deal, sale" price.
It could just as well be that the "higher, weekend" price is the "normal price" and the weekday price is the "deal, sale" price.
Airlines have been ripping customers for years. Ever tried to search for tickets while in incognito mode? Prices will most likely be lower, because there is no tracking information that can tell the airline "this person can pay more".
>One price for all is a cornerstone of our social contract. Discarding it will place that contract in danger.
...but we've had price discrimination for decades in the form of coupons, airplane tickets, and senior discounts. I don't see a particularly loud revolution, at least where I live.
...but we've had price discrimination for decades in the form of coupons, airplane tickets, and senior discounts. I don't see a particularly loud revolution, at least where I live.
Airlines are one of the most hated industries, seen much good press about United.
And their price discrimination is fairly transparent, it's the opaque discrimination that gets people ranting. Nobody likes being ripped off.
Coupons & senior discounts are tolerated both because they're transparent and everybody can or will be able to use them.
And their price discrimination is fairly transparent, it's the opaque discrimination that gets people ranting. Nobody likes being ripped off.
Coupons & senior discounts are tolerated both because they're transparent and everybody can or will be able to use them.
and yet "variable pricing" has been happening since ever even in low-tech offline business. Need your house painted and live in a "better" neighborhood? You'll pay more.
Ever heard of the "Tesla Tax" for people installing the outlet needed to charge their Tesla?
Ever heard of the "Tesla Tax" for people installing the outlet needed to charge their Tesla?
> One price for all is a cornerstone of our social contract. Discarding it will place that contract in danger.
That is a very strange statement - could you explain how did you come to such a conclusion?
That is a very strange statement - could you explain how did you come to such a conclusion?
When commodities are traded, the price is set at the marginal cost, which is usually only slightly higher than the actual cost. So the consumer makes much more "profit" on each trade than the producers do. So even though capitalism is seen as highly unfair, it's tolerated -- the poor and the middle class do better than they would under communism or feudalism or anything else.
But if the producer is able to capture the surplus, the already rich capture all of the profit, and the system becomes much less balanced, the poor & middle class start feeling even more exploited by the rich. They decide that it's better to have a small pie divided evenly than to just have the crumbs from a large pie, and start voting in candidates who promise to dismantle trade deals, tax the rich, et cetera.
But if the producer is able to capture the surplus, the already rich capture all of the profit, and the system becomes much less balanced, the poor & middle class start feeling even more exploited by the rich. They decide that it's better to have a small pie divided evenly than to just have the crumbs from a large pie, and start voting in candidates who promise to dismantle trade deals, tax the rich, et cetera.
No, capitalism is preferred over feudalism and communism because it maximizes individual agency. It may be difficult because you might have a hard time eating, but you can always quit working in capitalism without worrying about the state punishing you.
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Yes, it makes mathematical sense, but it feels bad at a visceral, gut level. From personal experience, when visiting some countries, taxis would quote 2x or 3x the standard fare just because they saw I was clearly a tourist.
This is essentially the same, except there isn't even an option for haggling.
This is essentially the same, except there isn't even an option for haggling.
> it feels bad at a visceral, gut level
Using 'visceral, gut level' as a guide for ethics usually leads to ugly consequences.
Using 'visceral, gut level' as a guide for ethics usually leads to ugly consequences.
Not at all. I would argue the opposite. Ignoring it leads to ugly consequences. It's why we got Trump. For a lot of people, the idea of illegal immigrants cutting in line to get to the US, feels unfair and they took the bait.
Same thing here. Is it fair for me to get charged more than the next person for the same trip? Everyone understands the feeling of unfairness (even dogs [1]). Humans don't make perfect mathematical choices, which is why the entire field of behavioral economics exists, and it's why Uber will be eventually forced to provide even pricing, whether they like it or not.
[1] - http://www.pnas.org/content/106/1/340.full
Same thing here. Is it fair for me to get charged more than the next person for the same trip? Everyone understands the feeling of unfairness (even dogs [1]). Humans don't make perfect mathematical choices, which is why the entire field of behavioral economics exists, and it's why Uber will be eventually forced to provide even pricing, whether they like it or not.
[1] - http://www.pnas.org/content/106/1/340.full
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Your airlines and hotels are already doing this along with the travel industry in general (and they've been doing it for a long time). Amazon will almost definitely do this more broadly one day (they do some version of this now already). Physical retail will definitely do this once the in-store tech to manage the pricing complexity catches up. Sure, the degree and granularity to which each of these industries implement something like this may vary but I think that at the end of the day, it just makes sense from a business perspective.
So while the word "Uber" might trigger some people, I think there's a broader, more interesting conversation to be had here outside of the Uber context.
So while the word "Uber" might trigger some people, I think there's a broader, more interesting conversation to be had here outside of the Uber context.
I put this link in another comment but Amazon and Google were already doing it.
https://www.theatlantic.com/magazine/archive/2017/05/how-onl...
I read that Amazon in fact already does it, too. They price high-volume goods competitively, but niche products, not so much.
Nearly any cleaning supplies from my experience are much more expensive in Amazon than in a local store.
For example: https://www.amazon.com/dp/B00J5HK3MY one can of Ajax (same size) costs $0.99 in Rite Aid.
Perhaps people who are buying cleaning supplies from Amazon are so used to it that they never visit local stores?
For example: https://www.amazon.com/dp/B00J5HK3MY one can of Ajax (same size) costs $0.99 in Rite Aid.
Perhaps people who are buying cleaning supplies from Amazon are so used to it that they never visit local stores?
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They also perform micro optimizations based upon what information they can gather on you. For instance, they may price an item higher if they can determine that you're using a Mac from the user agent
> Amazon will almost definitely do this more broadly one day
What is stopping networks of Amazon users from forming co-ops where each purchase is checked against and ordered by the user with the lowest price?
What is stopping networks of Amazon users from forming co-ops where each purchase is checked against and ordered by the user with the lowest price?
That already exists today in some form. Several sites cross check prices and track item prices over long time periods and store historical data for you to browse. You can even set alerts.
But I don't use them because I'm lazy and millions of other customers with Amazon prime are too.
But I don't use them because I'm lazy and millions of other customers with Amazon prime are too.
>> What guarantee do users have that they won't be individually selected to receive a higher price?
As long as Uber is not the only means of transport, this issue should take care of itself. Besides, as another comment points out, isn't this pretty much standard across industries?
Not sure what this has to do with Uber in particular which doesn't apply to any other company.
As long as Uber is not the only means of transport, this issue should take care of itself. Besides, as another comment points out, isn't this pretty much standard across industries?
Not sure what this has to do with Uber in particular which doesn't apply to any other company.
> Not sure what this has to do with Uber in particular which doesn't apply to any other company.
How would you fell if prices on amazon were higher for you than for others because of your income, residence or historical purchase data? With all the margins going to amazon instead of the sellers.
How would you fell if prices on amazon were higher for you than for others because of your income, residence or historical purchase data? With all the margins going to amazon instead of the sellers.
Amazon did try and user feedback was enough back in the day to make them stop - it wasn't the dominant retailer back then and users had much more power, so there's that.
Byw plenty other retailers already do or did adjust prices: Apple users are commonly targeted for being price insensitive.
Byw plenty other retailers already do or did adjust prices: Apple users are commonly targeted for being price insensitive.
I'm pretty sure Amazon already does this - prices are different based on your location and purchase history at the very least. Sometimes its obvious but other times they will just push a different seller to the top of the list which effectively changes the price. You can chalk it up to their 'dynamic pricing' but it always seems to favor me over my wife (the majority of our purchases go through my account).
This happens all the time, but it depends on user ignorance or apathy.
Just shop using different browsers or devices. Use incognito modes for everything. Use multiple entry points. Use multiple loyalty cards (and don't intermix credit cards amongst them.
For a real-world example, I use 4 different Starbucks cards. Each gets very different reward offers, every time. Y
Just shop using different browsers or devices. Use incognito modes for everything. Use multiple entry points. Use multiple loyalty cards (and don't intermix credit cards amongst them.
For a real-world example, I use 4 different Starbucks cards. Each gets very different reward offers, every time. Y
I don't disagree. If you have done this much research though, you could actually set up a little case study on this, write an eBook with nothing more than screenshots on how the price changes, and put it up for sale as something which will save people atleast $x per month. :-)
Ok? That makes perfect sense. They're not a charity.
People like to use this as an excuse to attack capitalism in general, a la "if corporations didn't run things, we would charge as little as possible instead of as much as possible". However, this is entirely missing the point; it's critically important that businesses charge as much as they can get away with. Why? Because prices are how market information is communicated, and high profit margins indicate an imbalance between supply and demand. If Uber charged the bare minimum they could get away with and still survive, there would be no incentive for competitors to come in and attempt to undercut them, leaving the supply/demand mismatch as it is. In a zero-overhead idealized market, competitors would keep coming in until profit margins were within epsilon of zero; obviously we can't do exactly that in real life, but we want to get as close to that as possible.
People like to use this as an excuse to attack capitalism in general, a la "if corporations didn't run things, we would charge as little as possible instead of as much as possible". However, this is entirely missing the point; it's critically important that businesses charge as much as they can get away with. Why? Because prices are how market information is communicated, and high profit margins indicate an imbalance between supply and demand. If Uber charged the bare minimum they could get away with and still survive, there would be no incentive for competitors to come in and attempt to undercut them, leaving the supply/demand mismatch as it is. In a zero-overhead idealized market, competitors would keep coming in until profit margins were within epsilon of zero; obviously we can't do exactly that in real life, but we want to get as close to that as possible.
> If Uber charged the bare minimum they could get away with and still survive, there would be no incentive for competitors to come in and attempt to undercut them, leaving the supply/demand mismatch as it is.
Why? If supply/demand is mismatched in such a way that a competitor is necessary, then some potential Uber customers are not being served. Then either the customer can't even afford the minimal price, in which case competition doesn't help, or Uber's service is unavailable for some reason, which provides incentive for a competitor to come in and capture the market segment.
It is not absolutely necessary that everyone charge as much as they can; it just happens to be the case that money tends to be controlled by people who would like increase its amount.
In the hypothetical case of Uber turning into a charity that charges as little as possible, the price would simply include the market information that someone is willing to use their money to subsidize everyone's fares.
Why? If supply/demand is mismatched in such a way that a competitor is necessary, then some potential Uber customers are not being served. Then either the customer can't even afford the minimal price, in which case competition doesn't help, or Uber's service is unavailable for some reason, which provides incentive for a competitor to come in and capture the market segment.
It is not absolutely necessary that everyone charge as much as they can; it just happens to be the case that money tends to be controlled by people who would like increase its amount.
In the hypothetical case of Uber turning into a charity that charges as little as possible, the price would simply include the market information that someone is willing to use their money to subsidize everyone's fares.
An argument that only works if it is possible to compete. Most "markets" seem to consolidate into monopolies at the same time as entry to that market is tightly controlled. Telco/Airlines/ISP/Music etc.
Uber has different situations in different places, but to me it seems that they only have real competition in some cities in the US.
Uber has different situations in different places, but to me it seems that they only have real competition in some cities in the US.
Every company with lots of consumer data is trying to use it to increase purchases and purchase prices. The interesting thing is they can put some classic psychology theories to the test and find how closely the hypothetical matches reality or try things out to see what consumers do.
https://www.theatlantic.com/magazine/archive/2017/05/how-onl...
Price discrimination in moderation can be a good thing for business health and society. If a business can detect that a person can afford to pay more for the service, then that additional inflow effectively subsidizes the service for people who can only afford using the service at the cheapest rates.
That only works if:
1. Profits are capped.
2. The company cannot gauge or drop service to non-profitable customers.
Neither applies.
1. Profits are capped.
2. The company cannot gauge or drop service to non-profitable customers.
Neither applies.
1. Profits are inherently capped. I choose an upper bound of the value of everything on Earth.
2. Every private entity, in free market capitalism, has the right to refuse service to a customer if providing that service is not beneficial to said entity (bar some race, age, etc. issue). Are you making an argument to remove that right?
2. Every private entity, in free market capitalism, has the right to refuse service to a customer if providing that service is not beneficial to said entity (bar some race, age, etc. issue). Are you making an argument to remove that right?
This blows a hole in Uber's claim that they're just a booking service that takes a cut. They're clearly a reseller, which makes drivers their employees.
Can you explain how reselling makes them employees?
Uber's not just "taking a cut" anymore. They're dictating the price to the customers, and the amount they pay the drivers, and those two values apparently aren't actually related to each other.
Are authors employees of publishing companies?
Authors can negotiate how much they get paid per word, Uber drivers can't.
Uber is trying to outdo the U.S. healthcare system. You can't know the price until you need to leave. They have your calendar. Sure would be a shame to be late to your meeting/date, better pay up. They know where you live. They will happily take you from your home into the city for cheap. Need to get home somehow? Train shut down for the night and you have no alternative? Add $30 because fuck you. Oh by the way, if you try to make any software that compares our prices with anyone else's, we'll sue you. It's like having to do battle against HFT bots by reading the stock prices in the back of the newspaper. No thanks, I'll just drive and avoid all of this hassle.
"Charging as much as possible" is not evil.
"Charging based on information acquired by your phone spying on you or your social account tracking" is evil.
You've found market price when buyers complain but still pay. - Paul Graham.
If this is true, it's obviously different for everyone. And as long as Uber doesn't have a monopoly, this sounds perfectly reasonable to me.
If this is true, it's obviously different for everyone. And as long as Uber doesn't have a monopoly, this sounds perfectly reasonable to me.
I do not have a problem with this. Whatever makes sense to make a profit.
The only thing i detest about Uber is its aggressiveness and willingness to exploit every loophole they can find.
It's perverse that this article is talking about AI figuring out price discrimination and somehow manages to turn that into "and this will be terrible for the poor".
Price discrimination is _wonderful_ for the poor. Extract tons of money from the rich who don't give a shit, but still sell the service to poorer people at a price they can afford, with almost all the same benefits.
Price discrimination is _wonderful_ for the poor. Extract tons of money from the rich who don't give a shit, but still sell the service to poorer people at a price they can afford, with almost all the same benefits.
For everyone defending this practice, how do you feel about an employer paying you less for doing the same work as your peers?
>> Thanks to complaints from Uber drivers, who were beginning to suspect that the ridesharing company was charging customers more with "upfront pricing" but not paying drivers more in turn
It sounds like they aren't paying "my peers" more. They're just charging more and taking a bigger cut.
It sounds like they aren't paying "my peers" more. They're just charging more and taking a bigger cut.
I would be okay with it so long as it's based on clear criteria that I can influence to match the pay of my colleagues.
What's with the bad press about Uber lately ? Doesn't seem "organic" to me, more of a concerted effort by some org that want them down.
Not saying they don't deserve it, but somehow they have a scandal in the news every other week since a few months.
Not saying they don't deserve it, but somehow they have a scandal in the news every other week since a few months.
So, it's essentially the same as haggling with a regular taxi driver. (FYI, just in case: not every taxi in the world is officially registered and is using a meter). But because it's Uber, this common practice becomes evil.
> Uber isn't looking at individual customers' circumstances, the company claims, but group statistics
Given the reputation of this company, I wouldn't be at all surprised to hear this change at some point in the future.
Given the reputation of this company, I wouldn't be at all surprised to hear this change at some point in the future.
Two words: disparate impact.
I'd be very concerned that they're somehow charging more to a protected class. Yeah, pricing is a bit of a black box, but that isn't a defense against "blacks end up getting charged $1.2 for every $1 whites get charged for equivalent rides". There's enough protected classes that you can basically do p-fishing. "Uber price discriminates against black people" not statistically significant? Run the numbers again with Asian instead, and see if it comes up. Or women. Or religion (rides to church service more expensive? Whoops.)
I'd be very concerned that they're somehow charging more to a protected class. Yeah, pricing is a bit of a black box, but that isn't a defense against "blacks end up getting charged $1.2 for every $1 whites get charged for equivalent rides". There's enough protected classes that you can basically do p-fishing. "Uber price discriminates against black people" not statistically significant? Run the numbers again with Asian instead, and see if it comes up. Or women. Or religion (rides to church service more expensive? Whoops.)
lol! any proof?
I think parent means to search it in reverse: split the pricing by class enough and eventually you'll find something that correlates. That's a quest for a modern ambulance chaser to be sure, but I can see some merit in it.
Yeah, it'd be something that could possibly be dug up. Many location-based systems for price discrimination can run into similar issues - see https://en.wikipedia.org/wiki/Redlining
Note that being purely profit-driven through your pricing scheme isn't a good defense. There could easily be a "taxis are racist and won't go into certain areas, therefore Uber has less competition serving black neighborhoods, therefore Uber can increase their prices there."
Note that being purely profit-driven through your pricing scheme isn't a good defense. There could easily be a "taxis are racist and won't go into certain areas, therefore Uber has less competition serving black neighborhoods, therefore Uber can increase their prices there."
Profit maximization is not inherently evil unless it's monopolistic. Which in the case of ride sharing, it isn't.