How did you get that Grab ride? | Channel NewsAsia

INNER WORKINGS OF DYNAMIC PRICING

The engineering chief also helped demystify some aspects of dynamic (or surge) pricing, which was introduced here about 10 months ago. He noted that before this feature, pricings were “flat” for drivers in Singapore but, since then, taxi drivers are on average earning 20 per cent more than previously.

On the origins of the feature, Mr Ditesh, who is from Malaysia, pointed out that there used to be a tipping function on its mobile app. So when it rained heavily and taxis were difficult to come by, passengers could indicate how much they intended to tip the driver to incentivise them to come.

The result was that drivers tend to wait for promises of tips, while passengers would go on “bidding wars” as they put up higher amounts of tips for their rides.

“This was dynamic pricing at play,” he said, “But we wanted to have a more refined process.”

Today, his team has created an algorithm that has demand and supply as the main parameters for deciding the fare pricing. The pricing mechanism is also “non-linear” – so fares do not grow exponentially if the distance travelled is far, for example – and price caps are introduced to make sure of this, the engineer explained.

It also implemented a price cap – S$100 in Singapore – to make sure that the prices quoted for JustGrab are “not ridiculous”, he added.

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How did you get that Grab ride? – Channel NewsAsia.

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