Uber drivers taking advantage of their riders (again)

Earlier this week, I wrote a review of Brad Stone's book, The Upstarts, about Airbnb and Uber. I'ver blogged about Uber several times before, including this post about Uber drivers gaming the system by logging off in order to induce surge pricing. It turns out that is not the only way that Uber drivers can game the system, as Quartz reported last month:

Some Uber drivers in Lagos have been using a fake GPS itinerary app to illicitly bump up fares for local riders.

Initially created for developers to “test geofencing-based apps,” Lockito, an Android app that lets your phone follow a fake GPS itinerary, is being used by Uber drivers in Lagos to inflate the cost of their trips.

The drivers claim that they use the Lockito app in order to make up for Uber slashing fares earlier in the year:

Williams*, an Uber driver who asked his real name not to be used, says he heard about Lockito a while ago but initially had no interest in using it. “Uber was sweet, until they slashed the price,” he says. “They did not bring back their price up, so the work started getting tough and tougher.”

“When the thing was just getting tougher, I had no choice but to go on Lockito.”...

The funny thing is that Uber is clearly aware of Lockito, but allows drivers to continue using it:

Perhaps most surprisingly, drivers accuse Uber of not only knowing about app, but purposely not doing anything about it because they still want to maximize their profits.

“If you’re using Lockito [with] Uber [it] will tell you “fake location detected”…they will tell you [the driver],” says Williams. “Sometimes when I run it [Lockito], Uber will tell me, “your map of your location…is fake,” you’ll now click OK…and still yet, I take my money…”

I guess that way, Uber can claim that their fares are low and it is the actions of the drivers, not Uber, that results in high fares for passengers. If Uber raised their fares, it seems unlikely that drivers would now stop using Lockito. They've discovered a way to raise their incomes at essentially no cost to themselves, in a similar way to drivers in London and New York who were gaming the surge pricing algorithm.

As we note in the very first topic of ECON110, no individual or government will ever be as smart as all the people out there scheming to take advantage of an incentive plan [*]. This is just another example.

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[*] I've borrowed this point from the Steven Levitt and Stephen Dubner book, Think Like a Freak, which I reviewed here.