From Surge to Squeeze in Ride-Hailing Platform

“Smart pricing” in ride-hailing is pitched as a win-win: more rides for drivers, faster pickups for users. But in reality, it has turned into a squeeze machine—pitting drivers against riders while feeding platform profits.

What is Smart Pricing?

Smart pricing involves:

• Real-time adjustments based on demand

• AI-powered fare predictions

• Behavior-tracking of users and drivers

It’s designed to optimize “efficiency,” but often veils manipulation.

Smart for Whom?

Platforms often tout:

• “Surge encourages supply.”

• “Smart fares reduce wait times.”

• “Drivers earn more in busy zones.”

But these claims don’t hold up under scrutiny.

The Hidden Costs for Riders

1. Surge as Standard:
What used to be exceptional (surge pricing) is now default during peak hours. Even short rides during rush hour carry inflated costs.

2. Geo-Pricing Manipulation:
Your fare could be higher just because you're near an airport, stadium, or tourist hub—even if demand is low.

3. Ghost Demand Signals:
Algorithms sometimes trigger surge based on predicted demand, not actual. You pay more because the system thinks there might be a spike.

The Squeeze on Drivers

1. Shrinking Driver Bonuses:
Initial incentives that made smart pricing attractive have dwindled. What remains is an erratic earnings model.

2. Penalized Flexibility:
Drivers who choose their own hours or reject certain rides are often algorithmically deprioritized.

3. Hidden Commission Increases:
Some platforms charge up to 40% per ride, disguised through dynamic fare structures. Drivers get less even during peak times.

The Ethics of Surge Pricing

Is it ethical to charge $80 for a 15-minute ride during a thunderstorm?
While companies call it “market dynamics,” critics call it “algorithmic exploitation.”

• Emergency Profiteering has real-world consequences.

• Affordability Crisis: For working-class users, these price jumps are unsustainable.

Smart Pricing as a Psychological Game

Platforms leverage behavioral science:

• Anchoring: Show a high fare first, then offer a “discount.”

• FOMO: Highlight “only 2 drivers nearby” to induce urgency.

• Streaks & Challenges: Keep drivers in the loop longer, at lower actual reward.

Consumer Trust is Dwindling

Surveys show:

• 60% of users feel ride prices are unfair.

• 70% of drivers say earnings have dropped post-2022.

• Platform trust is at an all-time low.

The Future of Pricing: What Must Change

1. Algorithm Transparency:
Let riders and drivers see how prices are calculated.

2. Capped Surge Pricing:
Set upper limits during emergencies or public events.

3. Driver-Set Fare Models:
Empower drivers to quote rides based on route and context.

Lessons for Future Ride-Hailing Startups

If you're developing a ride app:

• Use real-time supply/demand but layer it with ethical guardrails.

• Let riders pre-approve fare changes.

• Make driver commissions flat, not percentage-based during surges.

Tech Can Be Ethical

Ride-hailing innovation shouldn’t mean moral compromise. Pricing tech can be “smart” and fair. Founders must resist the race to maximize margins at the cost of user trust.

Conclusion: From Squeeze to Solution

Smart pricing shouldn’t be a trap—it should be a tool for fairness and efficiency. The current system is broken. It’s squeezing both sides while inflating profits.