Onome Amuge
New research by Oxford Economics is challenging long-held assumptions about how ride-hailing prices should be set, particularly in emerging markets. The study finds that allowing riders and drivers to negotiate fares directly within mobility apps can lead to better price discovery, improved efficiency and wider access to transport services.
The research, carried out in collaboration with inDrive, the world’s second-most-downloaded ride-hailing app, is based on survey responses from riders and drivers across seven emerging economies including Colombia, Egypt, Mexico, Morocco, Nepal, Pakistan and Peru.
According to the findings, ride-hailing platforms have undeniably transformed urban transport over the past two decades. Algorithmic matching and dynamic pricing have made it easier to connect riders and drivers at scale. However, Oxford Economics argues that current pricing systems are increasingly strained in markets where incomes, trip conditions and travel needs vary widely.
According to the study, most pricing algorithms are built to optimise for average market conditions. In emerging markets, that average often masks deep differences between city centres and outskirts, between peak and off-peak hours, and between riders with vastly different purchasing power. As a result, a single algorithm-generated fare may fail to reflect the true cost of a trip for drivers or the affordability threshold for riders. When this happens, potentially viable trips are abandoned, and certain locations remain underserved.
The study indicates that in-app fare negotiation offers a practical way to close this gap. Rather than replacing algorithmic pricing, negotiation builds on it. Platforms still provide an initial fare estimate, but riders and drivers are given room to adjust prices to suit their specific circumstances. This introduces a degree of decentralised decision-making in markets where centralised pricing models are often too rigid to be fully inclusive.
Evidence from the surveyed countries shows that users have embraced this flexibility. On average, around 75 per cent of trips on inDrive involved negotiated fares, with adoption rising to about 80 per cent in parts of Latin America and the Middle East. For an industry known for user resistance to even minor changes, such figures point to strong acceptance of the model.
This uptake has translated into higher levels of activity. In Latin America, nearly two-thirds of both riders and drivers said they completed more trips because they were able to negotiate fares. Similar trends were reported in Egypt, Morocco and Pakistan, where most respondents said negotiation increased the number of trips they could complete.
Market data also points to faster user growth. In countries such as Peru, Egypt, Colombia and Pakistan, inDrive reached key user milestones within relatively short periods after entering the market, despite competing with established ride-hailing platforms. The findings show that fare negotiation has helped the company gain traction in crowded and mature markets.
Beyond scale, the research highlights the social and economic impact of pricing flexibility. In Latin America, 55 per cent of riders said negotiated fares on inDrive were cheaper than those offered by other platforms. At the same time, 66 per cent of drivers said negotiation helped them earn fairer incomes by avoiding trips that did not adequately cover their costs. About half of all respondents across the surveyed markets also said fare negotiation made it easier to secure trips to harder-to-reach locations.
“These findings highlight the limits of algorithmic pricing in highly variable markets. Where incomes, geography and trip conditions differ widely, allowing riders and drivers to negotiate prices can improve how markets clear, unlocking additional rides and improving overall efficiency,” said Anubhav Mohanty, director at Oxford Economics.
From a platform perspective, the model also has implications for long-term sustainability. Andries Smit, chief growth businesses officer at inDrive, noted that direct fare agreements reduce reliance on broad subsidies and short-term discounts often used to attract price-sensitive users. “By allowing riders and drivers to agree on prices that reflect real-world conditions, we see more trips completed, fairer outcomes for drivers, and better access to mobility for riders,” he said.
Over time, he added, this approach could support lower platform fees and more affordable rides, while keeping prices aligned with local supply and demand rather than artificial incentives.
Overall, the Oxford Economics study points to a shift in how ride-hailing platforms may evolve in emerging markets. It further shows that while algorithms remain essential for efficiency and scale, combining them with human judgement appears to deliver better outcomes at the margins.
