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I have news for you: Uber increases prices based on their guesses about how much you'll pay. They have been caught increasing prices for different customers at the same time in the same exact place.
For example:
They read your phone state and battery life. If they know you have 10% battery left, they will raise your price because they know you probably can't wait for another car. If they think you are a woman and you look at rides after midnight and your battery is low, they are going to charge an arm and a leg.
I try to keep my battery charged at 100% when I go out. I also check the price 10 minutes before I need it on both Uber and Lyft. That way they see someone load the app, check a price, and close the app quickly. This looks like a cheap person who they think can be enticed by a low price. They will routinely drop the price because they think I'm considering driving or something.
That sounds more like individual pricing than the "surge pricing" being discussed here (and a both/and situation is very possible).
I almost never use Uber/Lyft so I am not terribly familiar with their business models.
It's both. The "surge pricing" just means everyone has an increase at the same time. They don't even give that to the driver anymore.
Maybe people don't know this: drivers don't necessarily get the extra money. Drivers have known this since they decoupled the customer price from the driver earnings.
They fluctuate the price a passenger sees based on what they think they can get. They do the same per driver, so sometimes they offer a ride to drivers at a really crappy price in case there's a dumb driver who's new or desperate. It's better for drivers to reject that and wait for a better ride.
That's what the app is doing when it's "searching for a driver" for a whole minute even though there are clearly drivers in the area. It's the algorithm trying to scam some driver out of a couple bucks and you pay the price in extra wait time.