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The Amazing Ways Uber Is Using Big Data | Data Science Central

Surge pricing

These algorithms monitor traffic conditions and journey times in real-time, meaning prices can be adjusted as demand for rides changes, and traffic conditions mean journeys are likely to take longer. This encourages more drivers to get behind the wheel when they are needed – and stay at home when demand is low. The company has applied for a patent on this method of Big Data-informed pricing, which is calls “surge pricing”.

This algorithm-based approach with little human oversight has occasionally caused problems – it was reported that fares were pushed up sevenfold by traffic conditions in New York on New Year’s Eve 2011, with a journey of one mile rising in price from $27 to $135 over the course of the night.

This is an implementation of “dynamic pricing” – similar to that used by hotel chains and airlines to adjust price to meet demand – although rather than simply increasing prices at weekends or during public holidays, it uses predictive modelling to estimate demand in real time.

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The Amazing Ways Uber Is Using Big Data – Data Science Central.

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