The Economics of Fare Negotiation

Oxford Economics conducted a study to examine the role of in-app fare negotiation in on-demand mobility. The research explores whether allowing riders and drivers to agree on fares can improve price discovery, efficiency, and the accessibility of on-demand transport.

This study focuses particularly on emerging markets, where incomes, geographies, and travel conditions vary widely and fixed pricing algorithms may not fully reflect individual circumstances. The analysis draws on survey evidence from riders and drivers across seven emerging markets in Latin America, the Middle East and North Africa, and South Asia.

Our research finds that fare negotiation can bring additional rides into the system by enabling mutually beneficial trips that would not otherwise occur. Nearly two-thirds of inDrive riders and drivers surveyed in Latin America said they took more rides than they would have elsewhere, due to fare negotiation. A similar pattern was observed across the Middle East and North Africa: in Egypt, 65% of riders and 43% of drivers reported the same effect; in Morocco, 64% and 58%; and in Pakistan, 59% and 54% respectively.

For riders, negotiated pricing improves affordability. For drivers, it helps avoid under-compensated trips and improves alignment between fares and costs. The study also finds that negotiation can extend coverage to underserved locations and times, such as remote areas or late-night travel.

Overall, the analysis suggests that fare negotiation complements algorithmic pricing by introducing flexibility, improving both efficiency and accessibility in on-demand mobility.