How Uber plays on customer psychology: discharging phones, round numbers and avoiding loss

One of the features of the company Uber is "dynamic tariff". Depending on the demand for cars at the moment, prices can rise several times - up to 9.9 times the standard price. But it still does not stop service users.



Keith Chen, director of economic research for the company, gave an interview in the Hidden Brain podcast and shared the psychological techniques that are used in the company for relatively honest drawing of money from Uber customers.

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First, the application informs the user about the tariff increase and the degree of this increase. But it turned out that the user would rather go to pay for the trip with an increase in the tariff by 2.1 times than 2.0 times.



Economists already know that among sellers who place their lots on eBay, those who write a round price for it — $ 50 instead of $ 49 — sell goods faster. There is an assumption that a round number indicates negligence or haste of the seller, and the buyer subconsciously perceives such a proposal as more advantageous - once the seller is in a hurry, the price should be lower than the market.



In the case of Uber, an increase in the tariff is exactly 2 times more likely to be perceived as the greed of a company that wants to make money. And an increase in the tariff by 2.1 times shows that a certain complex algorithm is behind the calculations - it means that the price is certainly fair. At least that is what the client says.



Secondly, the company found that the client would rather pay a higher rate if his smartphone had almost discharged the battery (and the Uber application just asks for access to information about whether the phone went into power saving mode). It is clear that a person with a discharging smartphone will not want to remain without a taxi and will pay for the trip even at a higher rate. True, Keith Chen solemnly promises that this information does not affect the formation of the tariff for the client ...



Prior to working at Uber, Chen was a behavioral economist (this is how he positioned himself) and studied the psychology of primates — in particular, capuchins. It turned out that the lower primates have a need to avoid losses [ loss aversion ]. Psychologically, primates (including humans) perceive losses as stronger than acquisitions ( studies state that the loss of some value is perceived two times stronger than the acquisition of the same value).



It turns out that many of the features that influence the adoption of human decisions are laid down by nature and are not the result of education. Does Chen use experience with primates for pricing Uber - can only guess.