Uber drivers in the UK and US have been found to be “gaming the system” by teaming up to force higher surge prices before picking up passengers, according to an academic study, however, one Australian expert says the practice is unlikely to turn users away from the ridesharing service.
Uber’s self-proclaimed ‘dynamic pricing model’ allows for the app to respond to changing supply and demand in real time, driving prices up in times of peak usage, such as after sporting events or during storms. This algorithmic management is now being subverted by some drivers looking to earn a higher fare to “regain control” of the system, according to the study, seen by The Times.
Researchers at the University of Warwick and New York University said in a statement they found Uber drivers are “finding ways to trick the algorithm Uber uses to control them” by organising “mass ‘switch offs'” to drive surge pricing higher.
These “mass ‘switch offs'” are also being used to avoid the “unpopular” UberPOOL feature, which sees drivers picking up a number of different passengers headed in the same direction, according to the research.
The researchers said they interviewed Uber drivers in London and New York and analysed 1,012 posts on the Uberpeople.net website — an online forum for Uber drivers that is not affiliated with the company. In a post on the forum, seen by the researchers, one driver said: “Guys, stay logged off until surge”.
Responding to fears from another driver that Uber would realise its algorithm was being manipulated, the driver replied that “they already know” because mass deactivation “happens every week”.
However, a spokesperson for Uber Australia told StartupSmart this kind of behaviour is “neither widespread or permissible on the Uber app”, adding that Uber has “technical safeguards in place to help prevent it from happening”.
The ridesharing giant, which operates in 570 cities worldwide and is estimated to be valued at $US68 billion ($85.7 billion), has recently been marred by controversy over its questionable management practices, with founder and chief executive Travis Kalanick resigning in June amid claims about the company’s “toxic” culture.
While the study’s findings that drivers could be wilfully manipulating Uber’s algorithm may further mar its reputation overseas, such practices are unlikely to pose a notable risk to Australian users, according to Dr Rohan Miller, a senior lecturer at the University of Sydney who specialises in marketing and digital business.
“I don’t think it is going to be a mass risk in Australia — at a certain level it already happens,” Miller tells StartupSmart.
“People sit at home until the rate goes up. It’s an integral part of the Uber business model that people don’t start working until the rate suits them,” he says.
While surge pricing has been notoriously unpopular with some groups of customers, Miller believes even artificially-engineered surges would not be enough for people to abandon the Uber app entirely.
“I don’t necessarily think people will switch it off,” Miller says.
“Juts like drivers think they are gaming the system, consumers are also gaming the system. They use fare estimates and they don’t take rides that are financially exorbitant,” Miller says.
Uber challengers on the horizon
While the number of ridesharing startups operating in Australia has until now been limited, Miller believes industry disruption is on the horizon.
“Undoubtedly new technology will make for new market entrants,” Miller says.
“[These entrants] may be better capitalised than the existing local choices — I think that’s entirely possible,” he says.
Miller refers to drivers as the “weak link” in Uber’s business model, because Uber “needs them [drivers] to be happy”.
“Without their drivers, Uber doesn’t exist,” Miller says.
“Even if Uber drivers are getting as organised as the research suggests, they may decide to shift en masse to a new market entrant: that’s exactly what Uber can’t afford.”
Implications for the sharing economy
Michael Rosenbaum is the co-founder of Sydney-based accelerator The Sharing Hub, which bills itself as Australia’s first accelerator for sharing economy businesses. He believes peer-to-peer providers like Uber must take responsibility for ensuring features like surge pricing aren’t unfairly manipulated.
“It’s the responsibility of peer-to-peer marketplaces to put in place checks and balances to ensure that consumers are protected and have a great experience,” Rosenbaum says, adding that allegations of Uber drivers gaming the system is “not a good look” for the sharing economy.
“The key thing is for founders and startups to keep a close eye on the behaviour of their customers, both the suppliers and users,” he says.
To avoid similar situations in the future, Rosenbaum advocates for a culture of trust and transparency in the sharing economy.
“Make sure everyone is doing the right thing … the key to building a two-sided marketplace is building trust across that marketplace,” he says.
You can help us (and help yourself)
Now, there’s a way you can help us keep doing this: by becoming a SmartCompany supporter.