Uber Flat Fares

Uber Flat Fares

Uber Plus Pass

Uber Ride Pass: An introduction

For over a year, Uber has offered a limited monthly pass program called a Ride Pass (initially called Flat Fares) that provides discounted rides to its users. The pass itself is only offered in a few of the larger cities around the US. The program’s structure has varied significantly over time, and across cities, (different fare rates, discounts and upfront fees).  Even the name of the program has changed over time. I can only assume that the economists at Uber are fine-tuning the process to achieve whatever target Uber has set it for self with the program. Still, two features have not changed – the pass spans about 28 days (with a couple of exceptions where Uber offered to extend it a few days at the end of which I somehow missed out on the next month’s pass), and there is a very limited window of sign-up availability after which Uber sells out or stops offering it to customers. I am not a 100% sure that there is a fixed quota of users that Uber wants signed up, although the app suggests as much.

I first heard about the pass program in the summer of 2016. I signed up for my first monthly pass, when it was still being called the Uber pool pass in late August 2016. To the best of my ability this is how I used the pass across the last year or so (using a combination of trip history from the Uber app and my own credit card and email receipt history).

The first few months, the Uber pool pass was provided in a slightly different variation, a little different to the one provided today. The pass was offered in the form of what economists like to call a two-part tariff. You paid an upfront fee to avail the pass, and then a unit fee each time you used it.  In the case of Uber it started off with a $20 initial fee, and $2.99/ride. This is not as unusual as it sounds. You have probably paid a two-part tariff sometime or the other over the past year. Gym memberships, country clubs, discount stores like Costco’s and Sam’s Club, utility and internet providers all use various forms of two-part tariffs. Two part tariffs make economic sense after all.

It has since morphed into something quite different. To be fair, I should not even refer to it as Flat Fares anymore since it is no longer named as such. Call it a force of habit.

And what about the competition?

Lyft offers a similar monthly pass offer with a flat discount – but only on regular Lyft rides and not on Lyft lines. The discount is also a dollar less. For a price conscious consumer, this seems to be a definite disadvantage compared to the Uber Ride Pass, and even though I have bought both – I have only used the Lyft pass once.

(This is the first part of a series of three posts on Uber pass. It will include some of the economics behind it, and how a hypothetical graduate student’s demand function for transportation changes in response to changes in the structure of the Uber pass)