Exploring ride-hailing fares: an empirical analysis of the case of 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 known 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. However, a deeper understanding of prices is essential to evaluate and establish a future scenario with smarter regulation and fairer competition between ridesourcing and taxi services. Using 10-month data from the Uber’s application programming interface in the city of Madrid, this research studies the association of Uber fares with different explanatory variables. It also explores the main differences between Uber and taxi fares. The results indicate that trip distance, trip delay, 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, as well as Uber fares slightly increased during taxi strikes recently happened in Madrid. The paper concludes with some policy recommendations and insigths regarding the future of the hailing sector and the importance of prices in evaluating future changes and possibilities.