The secrets of Uber’s mysterious surge pricing algorithm, revealed
Fast Company - 10/29/2015
“Uber has all the information, and it’s making decisions about prices. Whether its interest is the same as the customers and the drivers isn’t something we know,” says Northeastern University researcher Christo Wilson.
Wilson, who specializes in “auditing” algorithms, and two Northeastern colleagues set out to reverse engineer how Uber’s surge pricing works in two cities—San Francisco and Manhattan—over the course of four weeks. In a paper being presented at a conference in Tokyo this week, they described how they mimicked 43 Uber customers using the app and also used Uber’s public interface for software developers to reconstruct what the company’s pricing system looks like behind the scenes.
Uber’s pricing algorithm is generally “fair,” they found, in the sense that it’s based on the laws and supply and demand and doesn’t seem to arbitrarily jack up the price. (An exception was a few, brief price “jitters” that the researchers uncovered. When they reported their findings to the company, Uber said they’d found a bug in the code and fixed it quickly.) Moreover, that system is responsive—surge prices seemed to be recalculated every five minutes. But their findings also indicated to them that surge pricing didn’t always work as intended.