Ride-share companies are increasingly using the data collected on our consumer behaviour to maximize profit.Christopher Katsarov/The Globe and Mail
Have you ever paid extra for same-day shipping? Or spent more to get an instant rideshare pickup instead of waiting five minutes? It’s something many of us do without a second thought.
We’re often willing to trade money for speed, but how much is that time actually worth to us? And more importantly, who gets to decide the price?
Increasingly, the data collected on our consumer behaviour is being used to maximize profits. Apps know if you’ll be more likely than others to pay higher surge-pricing rates if you’re looking for a ride in the morning - because that’s when you can’t be late for a meeting.
In some instances this could make you a mark. Maybe you get an even higher surge-price because you’ve shown you value your time more than others. Or … you’re just apathetic about your spending.
Recent research published in Econometrica dug into this question in the context of ride-hailing apps. The study analyzed data from a European platform where drivers bid on trips and customers choose between different combinations of price and wait time.
By observing millions of ride requests, the researchers estimated what they call the “value of time” for individual riders. On average, people were willing to pay around $13 or $14 an hour to save time. But the range was enormous. Some riders valued their time at just $5 an hour, while others were prepared to pay over $20.
One thing was clear. The value of time isn’t fixed. It changes with the time of day, how busy we are, and even our mood. During work hours, people were far more likely to pay extra to cut their wait. That makes sense. If you’re late for a meeting, the premium for a faster ride feels like a bargain. But when you’re not in a rush, waiting a few extra minutes might not seem like a big deal.
Companies know this. And they’re getting better at using that knowledge. Ride-hailing apps collect vast amounts of data on our habits. They can see how often we pay for faster service and how sensitive we are to price.
With this information, companies can tailor prices to us individually. It’s not just about charging more at busy times. It’s about charging you more specifically when you’re most likely to accept it.
Even when platforms don’t use personal purchase histories, they often employ “menu” pricing to sort customers by urgency. Uber and Lyft both offer options like “Priority” or “Wait & Save,” where you choose between a higher price for faster pickup or a discount if you’re willing to wait. These reveal just how impatient you are.
This approach to pricing isn’t limited to ride-hailing. Retailers and online platforms use similar strategies. According to a 2018 OECD report on personalized pricing, many companies already adjust prices based on location, browsing history, or even time of day.
One survey cited in the report found 40 per cent of retailers using AI personalization tools apply them specifically to pricing and promotions in real time. The OECD warned that while personalized pricing can make markets more efficient in theory, it also raises questions about fairness and transparency.
For consumers, it might be helpful to remember that buying speed isn’t always the only option. Rory Sutherland, vice-chairman at Ogilvy UK, shared a story about elevator design in a speech about how when people complained about slow elevators, the fix wasn’t to make them faster. It was to install mirrors around the elevator doors.
Riders found themselves checking their appearance, and suddenly the wait felt shorter. It was a cheaper, simpler solution that didn’t actually reduce waiting time at all but changed how people experienced it.
We can use this idea in our own lives. It makes sense to pay for speed when time really is money, like getting to an important meeting on time. But sometimes the urgency is manufactured.
Instead of paying extra, we can think about ways to make waiting less painful. Maybe it’s planning ahead, using the time to read or catch up on messages, or simply accepting a slower pace.
When it comes to purchasing goods or experiences, I’ve found that anything you can get instantly doesn’t produce the same level of joy, nor for as long, as something you have to wait for.
The anticipation of a reward is sometimes more exciting than actually obtaining said that reward. If you want to enjoy something more, try deliberately finding a way to delay receipt of that product or experience.
The question isn’t just how much your time is worth. It’s whether you’re choosing to value it yourself, or letting someone else set the price.
Preet Banerjee is a consultant to the wealth management industry with a focus on commercial applications of behavioural finance research.