Uber, the global ride-hailing giant, is once again facing intense scrutiny over its pricing practices. Two independent academic studies, one from the prestigious Columbia Business School in the US and another from the University of Oxford in the UK, have separately concluded that the company is utilizing opaque algorithms to significantly inflate its profits, often at the detriment of both its drivers and passengers. These findings add to a long list of controversies that have plagued the Silicon Valley titan, raising serious questions about transparency and fairness in the gig economy.
Columbia Business School’s Findings: Algorithmic Price Discrimination
Research conducted by academics at New York’s Columbia Business School, led by author Len Sherman, has accused Uber of implementing “algorithmic price discrimination.” Their study, based on an in-depth analysis of “tens of thousands of trips… as well as an analysis of over 2 million… trip requests,” asserts that Uber has systematically, selectively, and opaquely “raised rider fares and cut driver pay on billions of … trips.”
The Columbia paper specifically focused on 24,532 trips made by a single Uber driver in the US. It concluded that the introduction of “upfront pricing” in the US in 2022 (the American equivalent of the UK’s “dynamic pricing” algorithm) allowed Uber to dramatically increase its “take rate.” The take rate, which is the percentage of rider fares (net of driver pay) captured by the company, reportedly surged from approximately 32% at the start of upfront pricing in 2022 to upwards of 42% by the end of 2024.
Sherman expressed admiration for Uber’s algorithmic sophistication, stating, “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.” He further noted that since implementing upfront pricing, “Uber has increased rider prices, has cut driver pay, has increased its take rates, and, of course, has greatly improved its cashflow.” Indeed, Uber reported generating $6.9 billion in cash during 2024, a stark turnaround from a $303 million cash loss in 2022. This dramatic shift in profitability, according to the research, appears to be heavily influenced by the algorithmic changes.
University of Oxford’s Research: Lower Driver Earnings in the UK
The Columbia study’s findings are corroborated by a similar academic paper published last week by the University of Oxford. This British study, based on an analysis of 1.5 million UK trips between 2016 and 2024 involving 258 Uber drivers, found that many UK Uber drivers were making “substantially less” each hour since the ride-hailing app introduced a “dynamic pricing” algorithm in 2023. This change coincided with Uber taking a significantly higher share of fares.
The Oxford research specifically highlighted that since the launch of dynamic pricing in March 2023, Uber’s median take rate per UK driver had “increased from 25% to 29%, and on some trips … is over 50%.” Furthermore, the study revealed that the higher take rates were concentrated among higher-fare trips, meaning that the more a customer paid, the less the driver earned per minute. The average driver pay per hour in the UK, adjusted for inflation, fell from £22.20 to £19.06 after the introduction of dynamic pricing. Drivers also reported spending more unpaid time waiting for rides.
Understanding “Algorithmic Price Discrimination”
Algorithmic price discrimination, as described by these studies, refers to the practice where online platforms or retailers use big data and complex algorithms to set different prices for the same product or service for different consumers, or to vary the “cut” taken from service providers, based on their inferred willingness to pay or accept. This process is often opaque, meaning neither the buyer nor the seller fully understands how the price or payout is determined, leading to an asymmetry of information that benefits the platform. In Uber’s case, it’s suggested that the algorithm leverages insights into rider and driver behavior to optimize profitability per trip, rather than simply basing fares on distance and time.
Uber’s Response and Broader Context
Uber has vehemently denied the allegations. A company spokesperson 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.” They further asserted, “Our dynamic pricing algorithms help balance real-time supply and demand to improve reliability across the platform. Upfront prices are not personalised, our pricing algorithms do not use information about an individual rider or driver’s personal characteristics. Suggestions that our systems manipulate pricing unfairly or discriminate are simply false and not supported by evidence.” Regarding the Oxford report, Uber reiterated its stance from last week, stating, “We do not recognise the figures in [the University of Oxford] report,” and adding that “Every driver is guaranteed to earn at least the national living wage.”
These latest academic papers contribute to a long-standing series of controversies for Uber. Past issues include a 2021 UK Supreme Court ruling that mandated minimum wage and paid holidays for Uber drivers, and the 2022 “Uber Files” investigation, which exposed the company’s aggressive lobbying tactics and efforts to circumvent regulations globally. Jill Hazelbaker, Uber’s senior vice-president of public affairs, had previously asked the public to “judge us by what we’ve done over the last five years and what we will do in the years to come.” However, these new academic findings suggest that, at least in their view, some of the company’s recent operational shifts continue to raise significant ethical and economic concerns.
