Passengers aren't on the hook for the higher fare because they pay a fixed upfront price based on the app's estimate of the ideal route. And while drivers are encouraged to go the most direct route, they can choose to ignore their digital navigators for a route that tacks on extra miles. The drivers' pay is determined by the actual trip's mileage and time, which can vary based on traffic conditions or diversions.
In the taxi example, I quiz students on how taxi companies fixed this 'long-haul' problem. The simple solution was to set the fare to a per mile rate plus a fixed fee. By driving the shortest route, cabbies could save time, pick up more passengers and thus more of these fixed fees. I love that there was a simple contractual change to address the moral hazard problem. In the ride-sharing context, the problem may be too inconsequential to fix.
An Uber spokesman said the company estimates longhauling occurs on less than 1% of trips in the U.S.