The problem is that there's an implicit agreement that the amount the passenger is willing to pay is the gross amount the driver receives, of which fees are taken off the top.
The arbitrage between the shorter path and the longer path represents an undocumented fee given to Uber for no additional service rendered.
That doesn't jive with the story that Uber is providing a marketplace to connect independent drivers and passengers. Maybe Uber has dropped that way of framing what it does, but that's how they used to present themselves, as a technology company enabling transactions between drivers and passengers. Under that framing, where Uber is enabling a transaction instead of participating in two transactions, this would be like an online broker that sells your stock at $15.27 per share, tells you it sold at $15.25 per share, and pockets the $0.02 per share in addition to its advertised fees for the transaction.
This is actually how market makers operate. They buy/sell your stock, but the exchange also gives them a rebate on their fees. So selling your shares at $15.25 + fees (directly passed to you) but the exchange gives them a rebate of $0.02 per share. Naturally now your broker is incentivized to funnel transactions through whomever offers the best rebate, not the necessarily the best price.
The question in my mind is whether uber is taking any risk in that arbitrage, if uber is essentially selling me "the rider" a swap (floating for fixed) it doesn't seem unreasonable they should be compensated for taking that risk
they are. If something unexpected comes up (say a high volume of traffic due to a sudden accident), then uber will have to pay the driver the higher amount.
I've always kind of wondered that, because I see the word thrown around so freely as a fancy word for "opportunity", yet its textbook definition seemed a bit more nuanced.
How do you suppose that Uber is making any claims to you about what portion of your payment is going to the driver? I literally have no idea, when I book a ride, which dollars are going to whom.
They are not like a broker in that they do not advertise performing a transaction (whose price is known) at a certain fee. If your brokerage offers to sell 100 shares at $1, with a $5 fee, you know how much of the $105 should be going to whom. Uber only tells you a single, flat price.
This is not true anymore. It was at one point but now it's a static fare to take a person from x to y. That static fare is based on the route generated by Uber at the time that the trip is requested. Naturally, the static price is based on a minutes and miles estimation but it doesn't change in cases of unexpected delays or altered routes. The driver does maintain their ability to choose a different route, but it won't alter the cost to the rider or the driver's compensation. Passengers are shown the exact amount that a ride will cost at the time that they book.
I recently took a ride in SF where I asked the driver if we could stock for fast food along the way (I had just had a 6 hour flight and I can't eat on planes for fear of motion sickness). He said that a few months back he would have said yes but now that Uber has an upfront ride cost he wouldn't make any money while were were sitting in the driver through line. I had to eat so I offered $15 on top of the fare, great results, would ride again.
edit: It occurs to me that while users are offered a static fare, drivers could still be paid based on miles and minutes. That's obviously not how the driver in my example understood his compensation but it _could_ be the case.
Drivers have no obligation to stick to a particular route. The ride can be refunded if the route is egregiously long or indirect. Even then, if there is a valid reason (traffic, road closure) the ride can be upheld.
If riders are quoted a longer than optimal route, then that appears to be deceptive to me.
If they can take someone from A to B and then not get paid for it because of that kind of rule in how the task is preformed that's highly directed work of the kind you would give an employee.
If you contracted me to install cabinets in your kitchen, I couldn't defensibly take 1 year to install them, if I estimated 3 days. This doesn't make all cabinet installers employees.
3 days or 4 days and you still pay. Uber can't offord a 33% increase in trip length when paying per mile so defacto they are going to have very tight tolerances.
Further the scoring is separately done by the customer. So the conversation is "Can you take the scenic trip? Sorry can't." Further it goes that way because Uber drivers are employed by Uber not independent contractors connected by Uber to customers.
I think you interpret "egregious" differently than I do. You appear to be responding to a set of points I never made, while not addressing the one I did.
Basically if you want a sink replaced you can define what the sink will look like and function etc but not which tools they use to fix it. When someone is providing core business functions for a year+ receiving constant directions for short term tasks has direct customer interactions thus representing your business etc they just don't have much wiggle room.
The arbitrage between the shorter path and the longer path represents an undocumented fee given to Uber for no additional service rendered.