Algorithmically derived knowledge is a new source of asymmetric market power. Hal Varian noted this problem in 1995, writing in a paper called “Economic Mechanism Design for Computerized Agents” that “to function effectively, a computerized agent has to know a lot about its owner’s preferences: e.g., his maximum willingness-to-pay for a good. But if the seller of a good can learn the buyer’s willingness-to-pay, he can make the buyer a take-it-or-leave it offer that will extract all of his surplus.” If the growing complaints of Uber drivers about lower fares, too many competing drivers, and longer wait times between pickups are any indication, Uber is optimizing for passengers and for its own profitability by extracting surplus from drivers.
Algorithmically derived knowledge is a new source of asymmetric market power. Hal Varian noted this problem in 1995, writing in a paper called “Economic Mechanism Design for Computerized Agents” that “to function effectively, a computerized agent has to know a lot about its owner’s preferences: e.g., his maximum willingness-to-pay for a good. But if the seller of a good can learn the buyer’s willingness-to-pay, he can make the buyer a take-it-or-leave it offer that will extract all of his surplus.” If the growing complaints of Uber drivers about lower fares, too many competing drivers, and longer wait times between pickups are any indication, Uber is optimizing for passengers and for its own profitability by extracting surplus from drivers.