Case Study - Uber
Deriving the Consumer Surplus for Uber Ride Shares
Study:
Estimating consumer surplus (benefit) in the Uber industry by deriving demand curve using big data
Method:
Examine elasticity of surge pricing executed by Uber
A critical feature of Uber is that it uses real-time pricing (“surge” pricing) to equilibrate local, short-term supply and demand. A consumer wishing to take a particular trip can face prices ranging from the base price (what we call the “no surge” or “1.0x” price) to five or more times higher, depending on local market conditions. We observe detailed information not only for every trip booked with Uber AND, critically, when a consumer searches for a ride using Uber without ultimately deciding to make a request. We, thus, observe the price offered to the consumer, and whether they accept or reject that offer. This information is crucial in our strategy for estimating demand elasticity and curve
THE DATA
This table presents price elasticity estimates for each discontinuous jump in price. The surge prices on the left-most column indicate the higher of the two surge prices represented at the threshold e.g. the estimate created using the threshold between 1.2 and 1.3 would be labelled 1.3.
CONCLUSIONS
One day’s worth of consumer surplus, by our
estimates, is about $18 million. If Uber were to unexpectedly disappear for a day, that is how
much consumers would lose in surplus.
CONCLUSIONS
We find that consumer demand is inelastic, despite the existence of what would seem to be reasonably close substitutes (competitors, taxis, public transportation, driving one’s self). Inelastic demand translates into large consumer surplus estimates: roughly $2.88 billion dollars in 2015 for the four cities in our sample, or $6.76 billion if extrapolated to all UberX trips in the U.S. for that year. This estimate of consumer surplus is two times larger than the revenues received by driver-partners and six times greater than the revenue captured by Uber after the driver-partner’s share is removed.
Case Study - Uber
Kevin Magnani
Created on October 22, 2025
Start designing with a free template
Discover more than 1500 professional designs like these:
View
The Power of Roadmap
View
Simulation: How to Act Against Bullying
View
Artificial Intelligence in Corporate Environments
View
Internal Guidelines for Artificial Intelligence Use
View
Interactive Onboarding Guide
View
Word Search
View
Sorting Cards
Explore all templates
Transcript
Case Study - Uber
Deriving the Consumer Surplus for Uber Ride Shares
Study:
Estimating consumer surplus (benefit) in the Uber industry by deriving demand curve using big data
Method:
Examine elasticity of surge pricing executed by Uber
A critical feature of Uber is that it uses real-time pricing (“surge” pricing) to equilibrate local, short-term supply and demand. A consumer wishing to take a particular trip can face prices ranging from the base price (what we call the “no surge” or “1.0x” price) to five or more times higher, depending on local market conditions. We observe detailed information not only for every trip booked with Uber AND, critically, when a consumer searches for a ride using Uber without ultimately deciding to make a request. We, thus, observe the price offered to the consumer, and whether they accept or reject that offer. This information is crucial in our strategy for estimating demand elasticity and curve
THE DATA
This table presents price elasticity estimates for each discontinuous jump in price. The surge prices on the left-most column indicate the higher of the two surge prices represented at the threshold e.g. the estimate created using the threshold between 1.2 and 1.3 would be labelled 1.3.
CONCLUSIONS
One day’s worth of consumer surplus, by our estimates, is about $18 million. If Uber were to unexpectedly disappear for a day, that is how much consumers would lose in surplus.
CONCLUSIONS
We find that consumer demand is inelastic, despite the existence of what would seem to be reasonably close substitutes (competitors, taxis, public transportation, driving one’s self). Inelastic demand translates into large consumer surplus estimates: roughly $2.88 billion dollars in 2015 for the four cities in our sample, or $6.76 billion if extrapolated to all UberX trips in the U.S. for that year. This estimate of consumer surplus is two times larger than the revenues received by driver-partners and six times greater than the revenue captured by Uber after the driver-partner’s share is removed.