Ubers surge pricing explained – and how to avoid getting caught out by them

Uber's surge pricing sometimes feels arbitrary. These extra costs often confuse Uber riders as they are hit with extra fees at times they don't expect it to.

Many of us have found ourselves at the receiving end of these unexpected surge prices, and these additional costs can often put a strain on the wallet.

For those wondering how it works, there are many factors that influence the price fluctuation of a ride. For example, the timing of your ride plays a major role.

But in the end, it comes down to supply and demand. For example, if you take a trip that you travel using Uber regularly, and there happens to be a football game happening nearby, the demand for a car increases.

Factors like a nearby event, or even whether you're booking during a rush hour when people are travelling to and from work influence the prices.

The supply of Uber cars is limited so in these cases of high demand the price can surge, according to Uber's website, "Prices may increase to help ensure that those who need a driver can get one."

This results in a hike in the price you would otherwise pay to get from A to B.

This is an instance when prices are surging, standard rates are multiplied, there is an additional surge amount or an upfront fare estimate. However, Uber’s service fee percentage does not change during surge pricing.

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As rates are updated based on demand for Uber cars in real-time, surges can change instantly and are also specific to different areas in a city, meaning that certain neighbourhoods may experience a price surge whilst others do not.

So, just how do Uber calculate their surge charges?

It's likely that there is a complex algorithm in place behind Uber's fare calculations

As with everything, a surge is not just a random number that is picked out of thin air, it is a product of a complex algorithm and calculation that works out just how much you will be paying for your journey depending on the day and time of your trip.

We reached out to Uber to understand this process in a little more detail. An Uber spokesperson commented: “The Uber app uses dynamic pricing to respond to the levels of supply and demand at any one time.

"When a large number of people in a specific area are booking a trip at the same time and there aren’t enough available cars, fares automatically rise to encourage more drivers to go to the busy area and earn a higher fare.

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“Users will always see a fare estimate in advance so they have the choice to book a car or share the trip with others.”

So whilst it seems like Uber is happy to discuss the reasoning behind a surge charge, it appears as though they don't particularly want to disclose any exact details about the specific calculations used.

A thread on Quora discusses the potential calculations behind the shifting price points for Uber, shedding a little more light on the matter.

Platform contributor, Albert Hong, speculates: "On a very basic level, surge pricing is a direct function of the supply-demand curve. When available cars/drivers (supply) are scarce relative to the number of Uber requests by potential passengers (demand), Uber begins to raise a multiplier (2x, 3x, etc) in order to shift the curves and match supply with demand.

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"The idea being that while at price point A, off-line drivers will not feel it is worth going after customers, at a higher price point B, they will feel the opportunity is worth it and will come online and thereby add supply to better match demand.

"Finding this "tipping point" to add the marginal driver into the available pool is the goal of the algorithm and presumably will scale until enough drivers are available and online to meet demand."

Talking of what he believes the specific algorithm may be, he continued: "But my suspicion is the core algorithm is not outrageously complex and particularly ground-breaking in sophistication given it is a simple supply-demand function at the end of the day.

"If there are 10x as many Uber requests as Uber cars available, my guess is there is a gradual step-function type scaling mechanism until that imbalance of requests-to-drivers is alleviated and then vice versa as too many drivers come online enticed by the surge pricing structure."

It seems like all of these factors play into whether a surge charge is present and in the instance that you get caught with one when pricing up a journey, just know that it will blow over at some point.

Suddenly, nursing your pint and chatting with your friends for an extra half an hour at the pub while you wait for the surge to subside seems pretty tempting.

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