The Dangers of Inequality Hiding in Lyft Line’s Ridesharing Service

Getty Images_Lyft car

My wife and I are spending the summer in Austin where Lyft is experimenting with a ridesharing service called Lyft Line. This service enables a driver to pick up multiple riders during one trip to increase the profits of its mother company. There are a lot of touted gains to this service that have yet to be demonstrated, including less congestion during peak driving times, fewer CO2 emissions from fewer car trips, and other ecological aims that will likely brand this service as a net positive for the company. However, I am not particularly interested in discussing these objectives at the moment. What bothers me most is the potentially negative patterns of inequality that are associated with the current pricing structure of this new service.

I received an email stating that I can save up to 60% on my Lyft rides while in Austin by switching to Lyft Line. The price for enrolling is just $5.00 and my price per ride would be $3.99 for all fares under $20.00. This means that if you have a short ride that costs less than $20.00, you can leave with a bill of $3.99.

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This seems like such a great deal, but my wife and I decided to do a little online research in order to make sure this was really a good option. (She has taught me to do this in the past few years and it has payed off on more than one occasion!) Not 5 minutes after we began our internet search we received an email from our Airbnb host in Austin who had received the same deal, although she would only be charged $2.99 for Lyft Line rides. Being a good host, she decided to share this bounty with her guests to help them save money while they are in town. However, when my wife and I tried to redeem this offer we were told that it could only be used by the person to whom the email had been originally sent.

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Of course, this brought up a lot of questions on my part. For instance, why was my Airbnb host provided with a cheaper deal when we are literally located on the same plot of land and generally make all of our trips into the city from this same address. (My Airbnb is a ‘back of house’ unit located near the alleyway of her home.) To give you an indication of how unfair this practice might be, I will offer you an illustration: Let’s say that my Airbnb host becomes good friends with me wife and I and we all opt to carpool to the same places for the next two weeks. She would save $20.00 more than me and my wife for going to the same places in the city even though we would be leaving from the same geographical location each time. It makes absolutely no sense to me unless the company is rewarding her loyalty to the brand. Are locals provided with a discount to incentivize their service or loyalty to Lyft? Or are visitors immediately upcharged $1.00 on their base fare because they are likely to use the service more often than a local, and thus represent more money in the marketplace? (It would make more sense to incentivize more trips at a cheaper price to create more profit, but that’s just me.) I didn’t receive an offer for Lyft Line until I starting using Lyft in Austin, so my home address in Charlotte was not an incentive to send me an offer.

I sent the company an email to clarify their rationale on these disparate rates (and to solicit a coupon for the cheaper rate!). Here is my initial message to the company:

Hello,

I am writing because I would like to know how the promotional deals for line rides are calculated. A friend of mine received a direct offer for $2.99 rides (in Austin), while I received a direct offer for $3.99 rides (inAustin). I would like to know why the offers are different–why do I not qualify for the lower discount price? I was initially excited about the offer, but now am suspicious about the differential pricing. (My friend and I live in different area codes, so the different terms of this offer sound prejudicial!) I have pdfs of our different offers and can send them to you in a normal email.

After sending a follow up email with the two images I’ve pasted above, I received this response from the company:

Hi there Charles,

Thank you for reaching out to us about your question. In Lyft we ensure that passengers will be charged fairly for their rides so no worries, I’ll answer it for you.

While Classic Lyft ride amounts are based on a combination of distance and time, with Lyft Line, you enter your pick-up and drop-off locations in advance, and our system will use that information to come up with the base amount. The base amount will then be discounted, depending on factors like the probability of being matched with another person, passenger demand, and driver availability.

Because of this varying discount, the same ride can cost different amounts at different times or locations. The discounted price that shows up in-app when you’ve requested the Lyft Line is fixed. Fluctuations in traffic or changes to the route during the ride will not affect the price.

I hope I was able to answer your question. If there’s anything else that I can help you with, never hesitate to email back.

Have a safe day,

Racela
Lyft Support Representative

Help Center – http://lyft.com/help
Ask Lyft on Twitter! — http://twitter.com/asklyft

This response, which duplicated the language posted on their website, only addresses my concerns if their rates were calculated from our different home addresses. (I live in Charlotte, so my status as a visitor to Austin might be a factor.) However, if two people are literally located at the same address in Austin, then the above rationale makes no sense. Remember, their clarification is that “The base amount will then be discounted, depending on factors like the probability of being matched with another person, passenger demand, and driver availability”: this should be the same for someone living at the same address.

I followed up on the company’s response with the news that my Airbnb host and I are literally located 50 feet from one another in East Austin:

Dear Racela,

Thank you for your note. I have a follow up question based on your response. My friend is an Airbnb host and I am currently staying in her loft in East Charlotte. Given the information you’ve provided, we should be given the same considerations since we are literally traveling in the city from the same location. However, even though we are starting in the same location, and often go to the same spaces, she is given a discount of $1.00 less than me and my wife. If you are calculating rates from a randomized algorithm, then you need to tweak it because it is NOT working.

I can appreciate you and your company trying to make Life Line a valuable service in the area. Everyone loves discounts and appreciate exclusive services when they are available. However, if the people of East Austin who run airbnb’s continue to know of and speak to their clients (like me) about such deals, and we discover that you are offering different rates for the same travel destinations, then we are likely to choose a competing service. No one likes to be discriminated against, for whatever reason. Find the base charge that can be shared amongst ALL of your clients or expect a lot of side-eye from those using your service.

Sincerely,

Charles Davis

I have yet to receive another response from the company. (If I do, I will post it as an Addendum to this message.)

Why, you may ask, am I so obsessed with saving $1.00/per (or ~$20.00 total) on a nearly 60% discounted ride? Normal rides with Lyft can easily come up to $20.00 or more without a discount in the city! My answer is that I am not just a spendthrift who is obsessed with paying the least amount of money for every purchase, although this can be a good habit in moderation. For me, there are more ominous implications associated with this type of game theory logic if it is applied more broadly in the marketplace, especially when the company is no longer willing to subsidize up to 60% of savings once they dominate market share. These concerns relate to creating new patterns of inequality that unnecessarily divide people living in the same neighborhood.

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If you read The Atlantic magazine’s City Lab with any regularity you know that they routinely publish articles that investigate the historical patterns of racial and class discrimination the have shaped American neighborhoods. The logic used to substantiate these patterns generally amounted to someone defending a better life for themselves at the expense of someone else. People who lived in wealthy districts that were historically segregated by either racial or class criterion made sure they had better access to the best amenities, such as entertainment and shopping districts, grocery stores, and public parks. In fact, companies paid more to be located near them to ensure they had access to their spending. However, those who live in low-income districts have to drive that much farther to gain access to these same amenities. This pattern of inequality meant that someone living in a poor neighborhood had to pay more for the same services, even when these services were provided by the same company in the city. Thus, the higher prices of products in the poor neighborhood helped pay for the lower prices in weather districts. (Think of the logic of the Republicans replacement health bill for the ACA and you get an idea of what I’m talking about.)

I worry that Lyft’s differential pricing structure might incidentally reinforce old patterns of segregation , or worse introduce new ones that have not even been thought of with their new pricing model. If Lyft is using a randomized algorithm to determine where someone might travel use their services, which is generally based on one’s past use, then they should remember that past use patterns are no indication of future use patterns, especially when the rules of engaging their service might change to enable new use patterns. This new pricing strategy seems poised to penalize people who might need to use their services with higher prices that are designed to pay for the incentives necessary to entice wealthier clients to their brand. In my mind, this is a clever way of repeating the old structural inequality that existed with brick and mortar stores in the past. Thus, an out of town visitor (such as myself) may THINK he or she is getting a great deal, but after some discussion with a few locals come to realize they are being used by the company to subsidize someone else’s membership.

This may not be a bad deal in certain cases. I can think of locals who are actually in need of incentives who I would be happy to subsidize. (This does not include an Airbnb homeowner who already owns not one, but two vehicles to get around.) However, when I am located literally 50 feet from a peer of mine in the city, but I have to pay $1.00/trip more for the same services, then there is something very wrong with how things are calculated. It appears to me, at least from the outside, that some ‘inherent’ aspect of my Lyft profile is being used against me to make me pay more money for the same service. Without a clearer explanation, I can only imagine that my race, class, neighborhood, or age is being used against me in the pursuit to lock in a higher segment of the ride share market.

I hope that this situation is merely a glitch in Lyft’s pursuit to determine a fair price for their service. However, I think it points to a greater need to federally regulate services like transportation in the marketplace, especially if it looks like these services can be taken over by privatized entities that fail to provide logical explanations for their pricing practices.

In the meantime, I will buy a weekly pass for the local bus service to make my way around the city. At least I know that everyone pays the same price for a fare on that ride!

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About cldavisii

Charles Davis is an Assistant Professor of Architecture History at SUNY Buffalo. He has a PhD in Architecture from the University of Pennsylvania and a M.Arch from the State University of New York at Buffalo. His specialization is the role of racial discourses in modern architectural style debates, including the ways that organic concepts of form allowed designers to invest buildings with racial and ethnic characters. In addition to maintaining this blog, his academic research and books reviews can be found in journals such as Architecture Research Quarterly (arq), the Journal of the Society of Architectural Historians, Harvard Design Magazine, Append-x and VIA. He is co-editor of Diversity and Design: Understanding Hidden consequences (Routledge: 2015), a volume of fifteen case studies examining the influence of diversity of contemporary design. His dissertation research will be published in an upcoming monograph entitled Building Character: the Racial Politics of Modern Architectural Style (University of Pittsburgh Press).