Decrypted: Uber’s First Unicorn and its Pricing Strategy

The ride-hailing giant is using data science to engineer a more sustainable business model, but it’s cutting drivers out from some gains:

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 Technologies Inc. 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.

Here is Brad Stone, author of The Upstarts: How Uber, Airbnb, and the Killer Companies of the New Silicon Valley Are Changing the World on Uber’s rise:

 

Uber Starts Charging What It Thinks You’re Willing to Pay

Source: Bloomberg

 

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