An empirical analysis of Uber fares: Evidence from Madrid

Abstract

Ride-hailing is an emerging service that is transforming door to door mobility in urban areas. Users can easily request a ride through a smartphone app that informs them of the pickup time, the location of the vehicle, and the fare that they will pay in advance. Even though it is well know that Uber implements a dynamic pricing approach depending mostly on supply, demand and competition with other services, there is still little empirical evidence on the main drivers explaining the fare strategy of the company. Using 10-month data from the Uber’s Application Programming Interface (API) in the city of Madrid, this research studies the evolution and trends experienced by Uber fares in terms of several explanatory variables. It also explores the main differences between Uber and taxi fares. The results indicate that trip distance, day of the week, origin and destination of the trip, and rain precipitation have a statistically significant impact on Uber fares. The findings also show that on average, Uber fares are lower than taxi fares, with the exception of particular hours of the day. The analysis also demonstrates that Uber fares slightly decreased during taxi strikes.