When taking a taxi is cheaper than an Uber

Image: Stefan Jaitner/Corbis

The crowdsourced cab service, Uber, is currently taking the world by storm. Commuters use the service's smartphone app to order a car, a request that is forwarded to the nearest available driver who then makes the pick up.

Uber itself determines the cost of the fare so no money changes hands in the cars. Uber determines its fares by the service it offers, by the time a journey takes and sometimes by the distance travelled. The price also increases when demand is higher. On New Year's Eve in 2011, for example, fares were reportedly seven times the normal rates.


So here's an interesting question: Is Uber cheaper than conventional taxis? Today, we get an answer thanks to the work of Cecilia Mascolo at the University of Cambridge in the UK and a few pals who have compared Uber's prices with those of Yellow Taxis in New York City. They say the ability to compare prices in this way should help commuters choose the cheapest options and thereby help control costs for all cab users.


This data set is vast, covering hundreds of millions of trips and tipping the scales at 50GB. It consists of the location of every pick up and drop off as well as the fare paid for each journey.

Comparing it with Uber's price at any instant is straightforward. Mascolo and co took the co-ordinates of each journey made in a Yellow Taxi in 2013 and then asked Uber how much it would charge for the same journey using the cheapest version of the service, called Uber X.


The results make for interesting reading. "Uber appears more expensive for prices below $35 and begins to become cheaper only after that threshold," say Mascolo and co.

That's interesting because human mobility is characterized by vast numbers of short trips and relatively small numbers of long trips. "This observation therefore suggests that Uber's economical model exploits this trend of human mobility in order to maximize revenue," say Mascolo and co.

There are two important caveats to this work. First, the Yellow Taxi data comes from 2013 while the Uber data comes from 2014. However, Yellow Taxi prices are set by the city and last changed in 2012 after being held constant for 8 years. So the 2013 fares should be a good indicator of 2014 fares as well.

Second, Uber X prices vary according to demand and Mascolo and co. took no account of this in their comparisons. They argue that the comparison is interesting and useful nonetheless. "We argue that the process of comparing two different companies that provide the same service in the same geographic area is of value to commuters," they say.

What's interesting about this work is that it opens up the possibility of real transparency for commuters in choosing the most cost-effective service. "Our observations show that it might be financially advantageous on average for travelers to chose either Yellow Cabs or Uber depending on the duration of their journey," say Mascolo and co.


Whether that will be possible isn't clear. But it is a step towards airline type price comparisons for people who want to use cabs and that should surely benefit consumers in the long term.

This article originally published at MIT Technology Review here