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> ...the company’s upcoming pricing algorithms, which they hinted might be able to more precisely predict what riders might be willing to pay for a ride. I hat

• save_ferris 7y ago
  Couldn’t this technically qualify as discrimination? I vaguely remember reading about how one of the big dating apps increased prices with a user’s age, but had to revert the policy because it amounted to age discrimination. I would hope income qualifies for the same protection, but maybe not.
  • pb7 7y ago
    It does not. Edit: Answering the very last part of the comment; it does not have the same protections.
    • jhoechtl 7y ago
      Why not? Care to elaborate?
      • pb7 7y ago
        Sorry, I figured there wasn't much to elaborate on. Age is a protected class (after a certain age I believe, 40+ maybe?) but income is not. Price discrimination based on income/socio-economic class is one of the most commonly exploited things in business.
  • 6gvONxR4sf7o 7y ago
    I think it's probably like any other decision you make on a person by person basis, like salaries. You can't use protected stuff as a factor, but you don't have to pay every employee doing that job the same amount.
  • esotericn 7y ago
    Yes, it is discrimination. I believe that you're asking whether it's legal. Also yes.
  • suyash 7y ago
    It is price discrimination but very hard to prove as one person doesn't know what another person is paying. The algorithm is proprietary.
  • cortesoft 7y ago
    No, income is not a protected class. If you could show that the price discrimination unduly hurts a protected class, you might have a case, but that is unlikely.
  • OkGoDoIt 7y ago
    Tinder almost certainly still discriminates pricing based on age. A friend of mine signed up for two new accounts a couple months back and the account where he listed his age as in his 20s would have been half the price as for an upgrade subscription for the one where he was listed as being in his 30s. Maybe they are using other factors, maybe he was in a different part of town when he signed up. Maybe it has to do with the school or the job listed in each account. You don’t know, and therefore you can’t prove anything. As long as the algorithms are a black box it’s hard to take a company to court over discrimination.
  • pmoriarty 7y ago
    This is exactly what the rich need: more protection. They're just so unfairly treated in the rest of society. It would be so unfair if Uber also discriminated against them.
• alecbenzer 7y ago
  I share the intuition that price discrimination feels wrong, but I have trouble really articulating why. Why is "the seller would have given it to me for less" any better than "the buyer would have given me more for it"?
  • Ericson2314 7y ago
    The problem is there is this bell curve thing. Charging rich people more sounds good and redistributory. But the really rich people have more leverage because there are so few other buyers with their purchasing power completing. End result would probably be like super high income tax with low rate "capital gains" loophole.
  • 6gvONxR4sf7o 7y ago
    I think it is similar to the frustration you'd experience if you told a taxi driver you're running late and they responded "okay, then it costs triple." It's an asshole move. Or if you told the bartender that you're celebrating getting a raise and they responded "okay, then your beer costs two bucks more." Or if there's a medicine that usually just reduces heartburn and costs $20, but you need it to survive, so they increase the cost to 90% of your life savings, just because you'll pay it. I'd say it's super dickish, but also struggle to logically articulate why.
    • ghaff 7y ago
      >I'd say it's super dickish I think that pretty much articulates how people view jacked up prices, especially (but not exclusively) in situations where people are in a tough situation through no fault of there own. Thus, the garage owner who is known for fleecing out-of-towners who have a breakdown is far more likely to get a local reputation as sort of an asshole rather than a shrewd small businessman. It does apply in other contexts though. for example, tickets to highly sought after concerts and sporting events are probably not as expensive as they could be. (And one result is profits flow to ticket agencies.) Look how hard it was to get tickets to Hamilton for ages. (Probably still is.) The thinking is that, if you're seen as price gouging because you can, that can work for a while but isn't a great look for a long-term relationship, to say, a band. Can you get away with it when transactions are very occasional? Sure. But things have a way of coming back to bite you.
• imustbeevil 7y ago
  From an efficient market standpoint, a good balancing measure would be if consumers knew exactly what it cost Uber/Lyft to provide the service. That way even if they charge you more for being rich, you can make an informed decision whether or not you want them profiting as much as they are from you. A competitor might even find an advantage by providing that information. For example, if a car service told you exactly how much the driver made and how much the service took as a cut, you might be willing to pay more because you know where the money is going.
  • sokoloff 7y ago
    Why would I care how they divided their money between the platform, the driver, and the company holiday party at HQ? I don't need nor even want to know how much Dunkin Donuts pays to make a donut or Exxon to buy, refine, and truck a gallon of gasoline to me.
    • lawlessquestion 7y ago
      Dunkin Donuts and Exxon provide all of the land, buildings, vehicles and materials their employees use to conduct business and turn a profit. Uber and Lyft not so much
      • sokoloff 7y ago
        More than half of Exxon's trucking is not company owned. All their filling stations are not company owned at this point (I believe that's accurate). The overwhelming majority of Dunkin locations are franchised as well. I don't care how they split the money up; I only care whether what they offer is worth the price they're asking to me.
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• stereolambda 7y ago
  You're presenting a future where there is (in the limit) no point in earning money. Lately there was a discussion about how in the future it makes no sense to buy insurance if someone is willing to sell it to you, you are always better off saving and you won't get insured if you actually need it[0]. I understand all these specific scenarios may be kinda-dismissed with some commonsensical argumentation, but has someone somewhere (in the academia?) explored how perfect information could break the economy/capitalism in some way? It looks like an interesting problem theoretically. (I don't feel like arguing either way, just would like a deeper look on this.) It's my understanding that economists actually think that perfect information should be a prerequisite/an effect of efficient markets, but did they really mean the same thing when this was formulated in the last century? [0] this tree may make this impression https://news.ycombinator.com/item?id=21778890 https://news.ycombinator.com/item?id=21778890
  • wutbrodo 7y ago
    > there was a discussion about how in the future it makes no sense to buy insurance if someone is willing to sell it to you, you are always better off saving and you won't get insured if you actually need it[0]. This is a misunderstanding of how insurance works. It makes sense to self-insured in expected $ value, but not necessarily in expected utility. There's nonzero value to lowering volatility[1], and the insurance company creates surplus by coordinating the pooling of risk across many people. For an easy example of the difference, for an easy example of the difference, I wouldn't take a 50/50 coin flip that would either cost me $1 million dollars or gain me $1.1 million; even though the expected value is $50k, because I couldn't afford such a high chance of financial ruin. I would however, sell the chance at this bet to an insurance company for $40k, and if they were large enough to absorb the loss (or bought many such policies), they would take it and gain $10k minus the (lower) value they place on the risk. (All numbers are made up, obviously). [1] this is a simple enough concept that you can derive it graphically from a utility/$ graph, and requires only the assumption of diminishing marginal utility of $
    • stereolambda 7y ago
      Yeah, I wanted to give an example and disclaim redoing that specific discussion if possible. But just to provide a different view, what you're saying is fine theoretically, but in practice often people see the insurance situation as "some bad costly thing X can happen to me, I want to pay reasonable money to not have to eat the whole cost if it happens". Now if insurance companies had some super-accurate data and models on you (a futuristic perspective here), they could just infer if X will happen to you and take some free money if it won't and refuse insurance/make you pay everything plus premium otherwise. One similar case nowadays is health and old age pension, though these tend to be very regulated or state-run (i.e., tax funded). The point is that the scope of things where this applies can become very wide in the future. Someone in the linked comment tree said "dispersion of the cost in wider population" is "not insurance, but a social solidarity scheme" and you may agree. But it's possible that we are currently running some "social solidarity schemes" only because of the imperfect information.
• blululu 7y ago
  Discriminatory pricing feels nasty when you're get the short end of the stick but any pricing scheme will have bias. Having a high wage earner pay the same fare for a service as a low wage earner gives a much better deal to the wealthier person. (In Finland traffic tickets are calculated as a percentage of your income) In many countries you will pay a surcharge if merchants think that you are wealthier since it implies a greater ability to pay. (Bulk discounts are not universal) The point where a flexible price structure becomes a problem is where price gauging is being practiced to take advantage of people in a bind.
  • suyash 7y ago
    Finland traffic tickets sounds like a horrible idea.
    • 4lejandrito 7y ago
      Sounds good to me. The rich is as afraid of getting a fine as the poor one. Otherwise rich people just wouldn't care. It is true that a score based system with no money involved would be equally useful but I guess people fear more about their money.
      • mertd 7y ago
        This is a great idea and also is nearly impossible to implement. There is no way to tell how wealthy someone is and even then how much of that wealth is liquid.
        • distances 7y ago
          It's not based on wealth but rather income, and the state obviously has this data readily at hand due to taxation. I don't see any reason why that couldn't and shouldn't be adopted all over the world.
          • deleted 7y ago
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• mcrae 7y ago
  Isn’t price discrimination embedded in nearly every transaction we engage in, though? What is the difference between price discrimination between classes of individuals (to your point, business vs leisure travellers), and individuals themselves? Nearly every pricing guide on this site recommends offering an ‘invoiced’ pricing plan for enterprises for substantially more than the same service on credit card billing. Price discrimination at its finest and, I would argue, a good thing for suppliers to extra more of the benefit they are providing to consumers. If the price of the Uber ride is higher than you value that ride... just don’t buy it. Otherwise enjoy the value you have extracted from Uber
  • suyash 7y ago
    No, go to amazon.com and look for your favorite product, now tell me if 10 people from different income level see that, will the price be diffferent?
    • cambalache 7y ago
      Probably a very high percentage of items(90% I am pulling things out my ass) are NOT price discriminated. Food, electronics, many many transportation fares (buses, subways), you get the money you pay the same regardless of your net value or income. People love to be contrarian, that's all.
    • cma 7y ago
      Wasn't that the whole idea of publishers attempting to ban book imports? Amazon or their suppliers do price discrimination regionally on many products I'm sure.
  • wutbrodo 7y ago
    > If the price of the Uber ride is higher than you value that ride... just don’t buy it. Otherwise enjoy the value you have extracted from Uber The surplus from a trade is divided between the buyer and the seller, and each party's surplus ranges from epsilon to 1-epsilon. Your claim that a move towards universally giving one party ~0% surplus and the other ~100% doesn't matter is self-consistent, but it shouldn't be surprising that society would concern itself with how surplus is divided (eg antitrust laws or any other competition-regulating policy)
• tmerr 7y ago
  Knowing the max someone was willing to pay could help an actor set their prices optimally where there is no competition. Where there is competition, setting price to the max someone is willing to pay could drop overall profits since a competitor would happily undercut. So it does not change the rules of the game. Companies already price by predicting what people are willing to pay, by theory and experimentation. I wouldn't expect them having perfect information change much other than quicker convergence to the prices they would set anyway.
  • stereolambda 7y ago
    But does that guarantee that the prices won't increase proportionally to your income? Companies are incentivized to make you buy stuff, not to make you motivated to make money.
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  • sagarm 7y ago
    With only two competitors here, there'll be plenty of producer surplus I'm sure.
  • lerouxmlr 7y ago
    yeah, agree fully with this. seems like a grey legit way of squeezing people for more money based on their normal day run indulgences.
  • ldoughty 7y ago
    Except corporations have already agreed to not seriously undercut each other... Geographic monopoly, understood collaborative price hikes... Forced plan changes post-capture that eliminate the most common plan and squeeze out an extra $5 per customer.... Simply having another player in the field is not competition, despite the federal government's claims.
    • AnthonyMouse 7y ago
• opportune 7y ago
  The worst part about price discrimination is that if there are a limited number of players in the market, it feels like, and maybe effectively is, price fixing. Now, it may not play out as direct collusion, but if only one company engages in it, they won’t be competitive for their wealthier customers, so it doesn’t make much sense. But if both participants in a duopoly do it, you have no options. It wouldn’t be possible to enact price discrimination for something with lots of competition
  • C14L 7y ago
    > they won’t be competitive for their wealthier customers Sure they will. You don't charge too much so that the customer will start feeling that its worth their time to look for alternative offers. That upper limit it usually higher the wealthier (or "spending happy") the customer is. So it totally makes sense to establish that limit individually per costomer.
    • matz1 7y ago
      Yes, the point is company can't just charge arbitrarily high price, they are still restricted by competition and the willingness of the individual to spend.
  • deleted 7y ago
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• trimbo 7y ago
  I mean, do you own a nice house or car? If you do, you've already experienced this sizing-up. A contractor comes to the house and sees you can afford 2x what they'd normally charge. A mechanic for your Lexus charges N times as much as the same mechanic would for your Toyota, even though they're the same parts and manufacturer.
  • victor9000 7y ago
    Which is why you should get wage quotes over the phone.
    • lotsofpulp 7y ago
      People smart enough to price discriminate won’t give quotes that easily.
      • bsder 7y ago
        Then I don't do business with them. Seriously, auto dealers STILL try to do this and it pissed me off to no end the last time I had to buy a car. Except one company. I sent in what I wanted on email. They sent back the quotes on 3 cars in stock. The quotes were all reasonable and slightly below the average. I went in and bought the car. Since then, seven other people in my social circle bought from the same auto dealer the same way. Sure, individual salesmen aren't making commissions, but that dealer is up probably up $25K in profit for roughly 15 hours mostly spent signing paperwork (it takes 2 hours just signing and signing for all the paperwork even if you walk in with financing). Attempting to "size me up" is almost always a good way to "piss me off".
        • lotsofpulp 7y ago
          Auto dealers are selling a product that can easily be found exactly the same and compared elsewhere. For custom work such as construction, you’re not going to be able to do that.
          • 7y ago
• C14L 7y ago
  Then, soon, there will be Uber arbitrage: I only order food from cheep places, so I get great prices for Uber rides. Now, you can pay me to order the Uber ride for you. I get half of what you safed had you ordered the ride yourself. Deal? (I never used an Uber and have no idea if that would work)
• brightball 7y ago
  It would likely lead to people working harder to find better prices. I moved into a nice house that was about to be foreclosed a couple of years back and after moving in, we had to get some of the same things done that we’d had at our previous home. The quotes were usually 2-3x higher for the exact same job.
  • Enginerrrd 7y ago
    This isn't all exploitative. I used to work trades and we regularly found the richer clients to be absolute PITA's about super minor details. They were the first ones to threaten not to pay unless we redid a big thing and also wouldn't offer to compensate for any phase of that.
    • rdiddly 7y ago
      Maybe if you charged them less they'd sweat the details less?
  • cortesoft 7y ago
    This doesn't make any sense... what these algorithms are doing is trying to determine how price insensitive the person is... they are trying to find a price point where, for this individual, they aren't going to make the effort to find an alternative because it is not worth the extra savings. If this leads people to work harder to find a better price, their software isn't working right... it should be charging that person less (just lower enough to not trigger this 'find a better price' desire) How much time a person is willing to spend to save money is going to be very proportional to how much money that person has, and this makes total sense.
    • brightball 7y ago
      The effect that I’m assuming is that this will work until people realize it’s happening. At that point, the price sensitivity will increase as a matter of opposition to price gouging.
      • 7y ago
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• KorematsuFred 7y ago
  That is how the market works even today without Uber and Lyft too. Everyone is trying to figure out the max you are willing to pay for something. It is just that finding that out is expensive and sometimes exceeds the benefits of bigger margins. Some business like Costco on other than totally opt out of the whole guessing game and would rather offer few choices at fixed price. Willingness to pay more also tells you a lot about the person's need and if the person is willing to pay more it is a signal that the person needs to more. Servicing those needs first is often beneficial for the whole society. For example a person traveling for an important business meeting that will help him earn lot more would be willing to pay more than teenagers going to the mall. A person trying to catch his international flight worth $$$$ might be willing to pay more than someone just going to get a haircut. Not only this sort of differential pricing makes sense it benefits everyone without hurting others.
  • LeftHandPath 7y ago
    > Willingness to pay more also tells you a lot about the person's need and if the person is willing to pay more it is a signal that the person needs to more. Servicing those needs first is often beneficial for the whole society. However, in this case, Uber and Lyft are not actually using willingness to pay. They are using ability to pay. To make the system more efficient, as you suggested, they would do best to implement a bidding system so that customers could directly opt to pay more (directly indicating their level of need). The algorithms in the article would unfairly prioritize wealthier drivers over poorer ones, if used to maximize margins, regardless of the level of need of either party. Wealth (ability to pay) is not an indicator of how badly you need to be somewhere else. Willingness to pay is. Their system is flawed. The differential pricing you've described might be beneficial to society, but the differential pricing discussed in the article is most certainly not.
    • KorematsuFred 7y ago
      > To make the system more efficient, as you suggested, they would do best to implement a bidding system so that customers could directly opt to pay more (directly indicating their level of need). You are absolutely right here. A bidding system would do wonders IMO but they are likely to release their version of auto-bidding system that would use person's personal data to approximate the bid. You might be mistaken that personal wealth would be a big factor. I think the target destination would be a bigger factor. For example drops to international terminals, Urgent Care, romantic dinner target locations would have a higher price rather than home, 7/11 or social security office. If I was an engineer or product manager that is how would I design the algorithm to maximize the margins. But sooner I would move to user bid prices. (Asking rich people to pay is not bad either, you can think of it as voluntary redistribution of wealth from rich to poor drivers).
• chewz 7y ago
  > Yet another reason to advocate for privacy, Take a taxi, pay with cash. Private.
  • OkGoDoIt 7y ago
    I agree in theory, but in practice taxis are significantly more expensive than even Uber. And you don’t know the price upfront. I don’t think I’ve ever had a taxi experience where I was happy with the value, at least in the USA.
• sidechaining 7y ago
  This right here is already happening in pricing for Uber passes. I’ve had the first month’s pass for a dirt cheap price and then it kept increasing over the months until I discovered I was not happy paying an increasing price. So, one month I did not renew my pass and bam - the price went back to its lower default price again...
• crazygringo 7y ago
  Everything about modern pricing theory -- from menu design to coupons to sales to promo codes advertised only to specific markets -- is about getting people who can pay more, to pay more, while still making a little bit of money on those can only afford the bare minimum. A millenium ago when you bought everything haggling in the market, the rich guy was paying 3x as much as everyone else because the vendors knew they could make him. Meanwhile, the impoverished grandmother gets the unsold leftovers for free. (The specifics obviously are made-up, but you get the gist. It's still the same in much of the world today. Foreigners visiting China pay much, much much more than locals.) This is the same human principle, just data-driven. It's kind of like progressive taxation, too: those who can afford to pay more, do. Now you may object: Uber doesn't need the money. But it does need to be able to sustain itself long-term. So much like first-class airplane fares allow economy flights to be as cheap as they are, similarly Uber passengers with the ability to pay more are exactly what make it cheap enough for other passengers to afford at all.
  • s1artibartfast 7y ago
    I tend to agree, but think that there is a line somewhere where it become price gouging. What if Lyft or uber have data that you have a flight to catch, are 9 months pregnant, or disabled?
  • davidgay 7y ago
    > Foreigners visiting China pay much, much much more than locals. Some years ago, I had an epiphany on the reverse-equivalent of this: foreigners visiting Switzerland pay exactly the same as locals. And it has pretty much the same effect.
  • tehjoker 7y ago
    This principle only makes sense if the contributions are funding a common service with a fixed cost. If there is no upper bound on the maximum cost, as is true of corporate profiteering, it is merely extraction with none of the progressive overtones as there is no longer a relationship between what you pay and the common good. This ignores that ubers and lyfts are a bandaid on our abysmal public transit and are a play by the wealthy to corner the transportation market until they can jack up the price for their own benefit.
• Johnie 7y ago
  What you're referring to is the three degrees of price discrimination. https://www.investopedia.com/ask/answers/042415/what-are-different-types-price-discrimination-and-how-are-they-used.asp https://www.investopedia.com/ask/answers/042415/what-are-dif... First Degree: This type of pricing strategy takes place when businesses can accurately determine what each customer is willing to pay for a specific product or service and selling that good or service for that exact price. (ie car sales) Second Degree: Companies price products or services differently based on the preferences of various groups of consumers. (ie Costco vs Whole Foods) Third Degree: Companies price products and services differently based on the unique demographics of subsets of its consumer base, such as students, military personnel, or seniors. (ie flights) The purpose here is for a company to identify the maximum consumer surplus it can acquire. As commented below, this surplus also changes based on supply/demand. Supply/demand change based on competitive products or substitute products.
• mirekrusin 7y ago
  Hey, we need a name for that "predictive discrimination"?
  • brokenmachine 7y ago
    Asshole AI?
• mirekrusin 7y ago
  What is (legally speaking) a difference between "algorithm deducing how much you can pay" from taxi driver looking at your face and setting their meter accordingly to their feeling of how much you can pay? Is this legal?
  • FireBeyond 7y ago
    Nothing, which is why taxi metering is set by the city/state, so it can't be altered (legally).
  • saberience 7y ago
    Except that cab drivers randomly setting their meters isn't a thing in any of the cabs I've ever been in, and I've lived in both NYC and London.
    • deathhand 7y ago
      "Sorry my credit card machine isn't working" is usually the go-to line for on the spot pricing.
    • CuriouslyC 7y ago
      Try catching a cab in any developing asian nation. If you're white and not asking to go basically where they wanted to go anyhow, they'll just shake their head, say "no meter" and give you a highly inflated price.
• OrgNet 7y ago
  Amazon shows different prices to different people already... I sent a link to someone and stripped the tracking bit, and it was $10 cheaper for him
• ajross 7y ago
  I get the privacy angle, but I'm failing to see the practical argument here. A policy like the one you're imagining would have the effect of punishing those individuals who are willing to pay premiums and unwilling to "shop around" or use alternative services. That is, it is a policy that in practice rewards the frugal and the poor at the expense of the wealthy and spendthrift. Is that... a bad thing? It sounds like a good thing to me.
• pentae 7y ago
  Exactly. How is this not a tech version of the scam taxi drivers you encounter when traveling overseas who refuse to use the meter and try to charge you a fixed fee thats 5-10x more than a local would pay. Charging different customers different prices for the same fare should be illegal.
• mark_l_watson 7y ago
  I don’t like differential pricing based on personal data either. It may not be true, but I have read references to Amazon doing this: different prices based on your history. I prefer now to enter Amazon on a private browser tab and then login when I see a price. There is no way to do this with an Uber or Lift app.
• brokenmachine 7y ago
  Hypothetically could I open a restaurant where someone at the door made a judgement call on how much a customer could afford, and changed the prices for them on that basis? That sounds like something discriminatory that should be illegal to me.