Data & Society > algorithm > Uber: Algorithmic Price-Fixing

Medium | 04.01.16

Uber: Algorithmic Price-Fixing

Alex Rosenblat

D&S Researcher Alex Rosenblat unpacks the implications of Uber’s power to unilaterally set and change the rates passengers pay, the rates that drivers are paid, and the commission Uber takes. She also asks whether the conditions of driving for Uber are necessarily a form of “collusion”:

How drivers earn money is directly impacted by the policies and behavioral expectations Uber devises for how they interact with the Uber platform, and with Uber passengers. Drivers have to meet Uber’s performance targets in their local markets, such as a 90% ride acceptance rate, a low cancellation rate, like 5%, and maintain a high average rating that hovers at a minimum of 4.6/5 stars, often by performing according to Uber’s “recommended” etiquette. If they fall below the local performance targets, they risk deactivation(an Uber word for “temporarily suspended” or “fired”).

Aside from these implicit controls over how drivers interact with the system, Uber has a policy of blind passenger acceptance through its automated dispatcher. The system is designed to encourage drivers to accept all rides by hiding the destination of the passenger, generating goodwill for the company and support from its passenger base. In effect, not only does Uber set the price — Uber also requires drivers to accept those fares when drivers might otherwise reject them for being unprofitable, such as short, minimum fare rides. Drivers also receive deactivation warnings for displaying a preference for surge fares over non-surge fares. As such, their eligibility to work on the Uber platform could plausibly be construed as contingent on the very conditions that would violate anti-trust laws: if they are not in compliance with Uber’s system for setting prices, they risk deactivation. Those restrictions on drivers’ independence really calls into question their ability to act freely as entrepreneurs.

 

 

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