Uber: Dynamic Pricing and Autonomous Car Testing

May 23, 2016


Uber is making headlines again for surging the prices for customers with dying batteries and testing its first self-driving car in Pittsburgh.


It’s no longer a secret that Uber collects data of its users. But what it does to the data is. Or was. The revelation is Uber devised a technology called dynamic pricing that feeds on said data.

Dynamic pricing does exactly how it sounds. Uber does not have a fixed pricing for rides; instead, the demand dictates how much the riders have to pay. Demand goes up, and the price will go up to as much as 9.9 times the normal rate. And users whose smartphones are dying are more inclined to accept the price surge, as revealed by the head of economic research at Uber.

Keith Chen said in an interview with the NPR: “One of the strongest predictors of whether or not you’re going to be sensitive to surge… is how much battery you have left on your cellphone.”

The original purpose of dynamic pricing was to encourage more drivers to make themselves available at peak hours, but it has grew into something on a psychological level. Uber uses a simple trick to make the price surge look reasonable, by not rounding up the new rates. Meaning, instead of surging the rate 2.0 times, it places the new rate at 2.1 times.

By tricking the users into thinking Uber is employing some intricate algorithm to arrive at the new rate of 2.1 times, they are more likely to think it’s fair and rational.

“Whereas if you say your trip is going to be 2.1 times more than it normally was, wow, there must be some smart algorithm in the background here at work, it doesn’t seem as unfair,” Chen said.

And to clear the air in case there is any suspicion, Chen said: “And we absolutely don’t use that to kind of like push you a higher surge price, but it’s an interesting kind of psychological fact of human behavior.” But, the fact doesn’t support what he said.

In a different note, Uber unveiled its first self-driving car at its Advanced Technologies Center in Pittsburgh. It is Uber’s own move to compete in the promising autonomous vehicle business which is currently occupied by Alphabet, Apple, Tesla and a handful of traditional carmakers.

The Ford Fusion Hybrid is equipped with sensor gear for autonomous capabilities. (Uber)

The car appeared to be a Ford Fusion Hybrid equipped with radars, laser scanners and high-resolution cameras which are intended for autonomous driving capabilities and road mapping data collection.

In the current state, the car still requires a driver, but only for monitoring purposes.

The testing came less than a month after Alphabet and Fiat Chrysler Automobiles formed an alliance for self-driving vehicles.

“Self-driving cars have the potential to save millions of lives and improve quality of life for people around the world,” a Uber representative said.

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