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Who Benefits From Surge Pricing?

Author

Listed:
  • Juan Camilo Castillo

Abstract

New technologies have recently led to a boom in real‐time pricing. I study the most salient example, surge pricing in ride hailing. Using data from Uber, I develop an empirical model of spatial equilibrium to measure the welfare effects of surge pricing. The model is composed of demand, supply, and a matching technology. It allows for temporal and spatial heterogeneity as well as randomness in supply and demand. I find that, relative to a uniform pricing counterfactual in which Uber sets the overall price level, surge pricing increases total welfare by 2.15% of gross revenue. Welfare effects differ substantially across sides of the market: rider surplus increases by 3.57% of gross revenue, whereas driver surplus and the platform's current profits decrease by 0.98% and 0.50% of gross revenue, respectively. Riders at all income levels benefit. Among drivers, those who work long hours are hurt the most, especially women.

Suggested Citation

  • Juan Camilo Castillo, 2025. "Who Benefits From Surge Pricing?," Econometrica, Econometric Society, vol. 93(5), pages 1811-1854, September.
    • Handle: RePEc:wly:emetrp:v:93:y:2025:i:5:p:1811-1854
    DOI: 10.3982/ECTA19106
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    References listed on IDEAS

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    Cited by:

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    2. Cheng, Shih-Fen & Hsu, Wen-Tai & Li, Jing, 2026. "When taxi drivers meet dynamic pricing: A lesson from Singapore’s JustGrab program," Regional Science and Urban Economics, Elsevier, vol. 117(C).
    3. Liu Ming & Tunay Tunca & Yi Xu & Weiming Zhu, 2025. "Market Formation, Pricing, and Value Generation in Ride-Hailing Services," Manufacturing & Service Operations Management, INFORMS, vol. 27(5), pages 1551-1570, September.

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