[System Design] Surge Pricing Algorithm: How Ride-Hailing Engines Calculate Surge Rate in Real Time

Short summary

Surge pricing in ride-hailing dynamically calculates price multipliers every 30–60 seconds per H3 hexagon cell using supply-demand ratios. It functions as marketplace equilibrium: higher prices attract drivers to hot zones while reducing demand, stabilizing wait times. Modern systems use ML models incorporating weather, events, and conversion rates with continuous feedback optimization.

• •Surge calculated per geographic H3 hexagon every 30-60 seconds from supply/demand ratio
• •Dual function: increase revenue AND equilibrate marketplace (attract supply, reduce demand)
• •ML-driven with continuous feedback loop using weather, events, conversion rates

Generated with AI, which can make mistakes.