Uber Accused of Algorithmic Price Gouging by Two Universities

Two prominent academic institutions are alleging that Uber employs complex computer code to boost profits. This comes at the expense of both its drivers and its passengers, according to the new research.

Columbia Business School Findings

Research from Columbia Business School in New York alleges that the ride-hailing giant uses “algorithmic price discrimination.” This practice has allegedly led to higher fares for riders and reduced pay for drivers. The study analyzed thousands of trips and requests to reach this conclusion.

The Ivy League school’s findings echo a similar study from the University of Oxford. That study, published last week, examined 1.5 million UK trips. It revealed that many UK Uber drivers have been earning substantially less per hour since the app’s dynamic pricing algorithm was introduced in 2023.

“Uber says ‘we know more about driver and rider behaviour, so we can figure out who is willing to pay more [as a passenger] or accept less [as a driver].’ I’m in awe of what they have been able to accomplish.”

—Len Sherman, Report Author

The report also states that Uber has “increased rider prices, has cut driver pay, has increased its take rates, and, of course, has greatly improved its cashflow during the period covered by this study.”

Financial Performance and Pricing

In 2024, Uber reported $6.9 billion in cash generated during the year. This is a significant increase from the $303 million cash loss in 2022. These findings come at a time when the average cost of a ride-hailing trip has increased by 40% in the last five years (Statista, 2024).

The Columbia study focused on nearly 25,000 trips by one US Uber driver. It found that Uber’s take rate increased from about 32% at the start of upfront pricing to over 42% by the end of 2024.

Controversies and Company Response

These new papers add to the issues that have dogged the company over the years. The ride-sharing giant was involved in a 2021 UK Supreme Court ruling. This ruled that Uber drivers are entitled to minimum wage and paid holidays. In 2022, the Uber files were released, revealing how the company misled regulators and secretly lobbied governments worldwide.

An Uber spokesperson responded. They stated, “Uber’s pricing is designed to be transparent and fair for both riders and drivers. Upfront pricing gives riders clarity before they book and allows drivers to make informed decisions based on full visibility into pay, distance, and expected duration.”

The company also said its dynamic pricing algorithms help balance supply and demand. They added that these algorithms do not use personal information about riders or drivers. Therefore, suggestions of unfair pricing or discrimination are simply untrue.