Kumar Ayush

I wrote the stub for this post in July 2022. I was working in Bengaluru. The world was opening up slowly after the Covid-19 pandemic. People were returning to office. They wanted to socialise after work, and on the weekends. Some parts of Bengaluru such as ORR, where I worked, also suffered additionally due to Namma Metro digworks.

Now, ride acceptance rates on cab aggregators (Ola & Uber) became a popular issue. It is easy to name them because at that point they were the entire market in Bengaluru. BluSmart had airport service and Rapido was a two-wheeler service. A general theory for low acceptance rates and general harassment from the drivers was that a lot of drivers had gone back to their villages during the pandemic and are yet to return so there is a supply shortage. I don’t know if this was a major factor, but migrant worker displacement due to the pandemic was real, so sure, believable. Disclaimer, the rest of this post is also going to rest on my anecdotal evidence.

One day, I had planned to go out for beer with a colleague after work and we find ourselves trying to book a cab outside our office on ORR to Indiranagar. We can see a fare of around ₹250 on Uber, rides are 10 mins away. Drivers would accept, call us and ask for our destination, then either cancel the ride or refuse to move towards our location. At the same time, there were a couple of auto rickshaws near us who were willing to charge ₹500 for the trip. I was growing impatient so I was willing to pay that. My colleague did not, because they thought the price is unfair. ₹500 is unfair because Uber shows the price as ₹250; which was surging higher as the evening went by, but till nowhere near ₹500. This struck me - I am willing to pay ₹500. The rickshaw driver is willing to accept ₹500. Why is ₹250 the fair price?

I am writing this now, as I am doing a post-graduate course in public policy from Takshashila Institution. I was reminded of this while going through some fundamental ideas in microeconomics. Firstly, two parties are willing to transact at a price if they each derive value out of the transaction. The price is discovered as a negotiation of our relative values. It is not a number which is fair or unfair on its own. Secondly, Mises and Hayek popularised that the ideal of being able to calculate the economy is socialism’s cardinal flaw because you either do not have the data or the economy is too complex to be calculable.

Cab aggregators are on the wrong side of both these concepts. Their opaque pricing algorithms distort price discovery. They collect a lot of data, and they have a lot of smart people computing the fair price for a cab ride. Yet, it is quite clear that they did not know my propensity for beer and the rickshaw drivers’ value for their time. With time, with more data, they can do better, I am sure. So could any centrally planned economy. That simply goes around the point. There is a supply problem with public transport, and that’s it. The cab aggregators tried to, and continue to try to incentivise the drivers to boost their acceptance rates. Both positive and negative incentives. They were penalised for cancelling rides, which led to refusal to move towards the rider’s location or harassing them to cancel the ride. They were given bonus money for completing n rides in a day, I learnt from a cab driver about this as he tried to race to my destination before it hit midnight. The efficacy and life of these measures depend on the leverage the drivers have. In 2026, there is more supply and drivers have less leverage in some cities, so they are trying to negotiate against cab aggregators politically.

Back in 2022, I figured if you must electronify the ride hailing market, then you might as well just take the bidding system that happens in person online. I found a few cab startups were already experimenting with a bidding system for cab drivers. Unfortunately I don’t remember much of their names now. I can only find InDrive as another name on a quick web search. There was one which even allowed payment in cryptocurrency. Anyway, I moved out of India later that year until recently. On my trips to India, I preferred Rapido or BluSmart generally to the airport and back which did not have these issues. As of now, BluSmart is out. I prefer Rapido if available. They set a price but allow you to bid lower or higher. I think this is fine. From a UX perspective, entering arbitrary amounts and bidding would be tedious. This works for me, but I don’t know if this resolves the contention generally.

The act of setting a price, or claiming that they are able to via an opaque algorithm based on who-knows-what and who-knows-how data makes me wonder if cab aggregators are a negative contributor to the market mechanism.