Uber drivers have been complaining that the gap between the fare a rider pays and what the driver receives is getting wider. After months of unsatisfying answers, Uber Technologies is providing an explanation: It’s charging some passengers more because it needs the extra cash.

The change stems from a feature introduced last year called upfront pricing. By guaranteeing a certain fare before customers book, Uber said, it provides more transparency. But it continued paying drivers using the old model, a combination of mileage, time and multipliers based on geographic demand. The difference between those two calculations could be the future of Uber’s business.

Daniel Graf , Uber’s head of product, said upfront pricing can’t be summed up in a simple formula. Uber applies machine-learning techniques to estimate how much groups of customers are willing to shell out for a ride, calculating riders’ propensity for paying a higher price for a particular route at a certain time of day, he said.

?For instance, someone traveling from a wealthy neighbourhood to another tony spot might be asked to pay more than another person heading to a poorer part of town, even if demand, traffic and distance are the same. Uber calls this “route-based pricing.”…



During the last year, Uber had attributed price discrepancies to the uncertainty around estimating fares, even as it was experimenting with techniques designed to exploit the imbalance between what customers were willing to pay and what drivers would take…

“It is immoral and unethical behavior,” said Chris Estrada, who drives for Uber.


…As Uber experiments with pricing models, complexity could introduce problems.

“Society is more willing to accept wealthy people paying higher fares,” said Chris Knittel, a business professor at the Massachusetts Institute of Technology. “But if the repercussion of lower fares in lower-income places is longer wait times, that’s probably what they want to keep an eye on.”