Oxford economics: In-app fare negotiation expands mobility access, boosts efficiency

New research by Oxford Economics has found that allowing riders and drivers to negotiate fares directly within ride-hailing apps can improve price discovery, boost efficiency, and expand access to transportation, particularly in emerging markets.

The study, conducted in collaboration with inDrive, the world’s second-most-downloaded ride-hailing app, draws on survey data from riders and drivers across seven countries: Colombia, Egypt, Mexico, Morocco, Nepal, Pakistan, and Peru.

According to the findings, while ride-hailing platforms have transformed urban mobility over the past two decades through algorithmic matching and dynamic pricing, fixed pricing models often fail to reflect the wide variation in incomes, trip conditions, and travel needs across emerging markets.

As a result, a single algorithm-generated price may not represent the true value of a trip for either riders or drivers, leaving potentially beneficial rides unfulfilled and some communities underserved.

The research shows that in-app fare negotiation helps bridge this gap by complementing, rather than replacing, algorithmic pricing. In most cases, price discovery begins with an algorithmic estimate, after which riders and drivers are able to adjust fares to suit individual circumstances. This introduces a decentralised decision-making layer that is better suited to heterogeneous markets.

Oxford Economics found that fare negotiation is widely used where available. Across the surveyed countries, about 75 percent of trips on inDrive involved negotiated fares, rising to around 80 percent in parts of Latin America and the Middle East.

This high level of adoption translated into increased trip volumes, with nearly two-thirds of riders and drivers in Latin America reporting that they completed more trips because negotiation was available. Similar trends were recorded in Egypt, Morocco, and Pakistan.

Market data cited in the study also suggests that fare negotiation supported rapid user adoption. In countries such as Peru, Egypt, Colombia, and Pakistan, inDrive reached major user milestones within relatively short periods after market entry, indicating strong acceptance of the model even in mature ride-hailing environments.

Beyond scale, the study found that pricing flexibility expanded access to mobility for riders while improving utilisation and perceived fairness for drivers.

In Latin America, 55 percent of riders said negotiated fares on inDrive were more affordable than those on competing platforms, while 66 percent of drivers said negotiation helped them earn fairer income and avoid underpaid trips.

Around half of respondents across all markets said fare negotiation enabled them to secure trips in harder-to-reach locations.

Commenting on the findings, Anubhav Mohanty, director at Oxford Economics, said the research highlights the limitations of purely algorithmic pricing in markets with high variability.

“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,” he said.

Andries Smit, chief growth businesses officer at inDrive, said fare negotiation restores human agency to the pricing process.

“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,” Smit said.

Smit added that the model also reduces reliance on subsidies and short-term discounts, supporting a more sustainable marketplace.

Overall, the Oxford Economics study points to a broader shift in the evolution of ride-hailing — from fully automated pricing toward human-algorithm collaboration.

While algorithms remain critical for scale, the report concludes that introducing price flexibility can improve efficiency and accessibility at the margins, expanding total ridership in diverse markets.

inDrive currently operates in more than 1,000 cities across 48 countries and has surpassed 390 million app downloads worldwide.