Taken for a ride: Uber and Lyft users overpay when they don’t price check

Think about the last time you took an Uber or a Lyft. Did you check both apps, or just book on the first one you opened?

New research coauthored by Professor Michael Luca, director of the Technology and Society Initiative at the Johns Hopkins Carey Business School, finds that riders are routinely leaving money on the table by failing to compare prices across Uber and Lyft. The working paper, released through the National Bureau of Economic Research and in collaboration with Jeffrey Fossett of Harvard Business School and Yejia Xu of Theia Insights, analyzes how often the two companies quote different prices for the same ride — and how rarely consumers take advantage of the opportunity to find savings.

The authors audited 2,238 identical rides, which were the same routes at the same times, in New York City, comparing prices on Uber and Lyft. For the same ride, Uber and Lyft’s prices differ by about 14% on average. Neither app is consistently cheaper.

The smartphone data showed that among riders who open Uber or Lyft, only 16.1% open both apps, despite how simple it should be to check a second quote. The authors estimate that these “search frictions” increase platforms’ revenue by more than $300 million per year in New York City alone - money that, in a more competitive market, could instead stay in riders’ pockets. The findings highlight that search in online markets isn’t always as easy as it should be, even when switching between apps requires only a few clicks.

In this case, the small barriers to price comparison — such as habit, perceived hassle, or app design — can weaken competition and raise average prices in digital markets.

“Small frictions can create real barriers in digital markets,” said Luca. “When riders don’t compare prices, they end up paying more on average, and platforms face less pressure to compete on price.”

Luca’s work points to broader challenges in the digital economy, and directions for policymakers to explore. 

“We should aspire to a digital economy that empowers consumers,” Luca added. “Effective policy needs to account for the way we engage with digital markets, and how this affects competition and consumer wellbeing.”

Luca’s previous work has examined a broad range of digital platforms—including ADP, Airbnb, Alignable, Facebook, Instagram, Wayfair, and Yelp—using economics and real-world data to measure how technology affects consumers and markets. His research and managerial writing has informed company and policy decisions, from steps Airbnb has taken to mitigate racial bias to policy efforts to address fake reviews. 

Building on his own research and work with companies, Luca launched the Technology and Society Initiative to assess and improve technology’s societal footprint. The initiative engages with faculty affiliates, post-docs, research assistants, doctoral students—and works regularly with companies and policymakers to bridge research and practice.

Organizations interested in sharing data for research, collaborating on field experiments, or learning more about the initiative are invited to contact TSI to explore opportunities.