Dynamic pricing: Difference between revisions
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==Why it is a problem== | ==Why it is a problem== | ||
=== Price discrimination === | ===Price discrimination=== | ||
Price discrimination is illegal in the U.S. if it is based on race, gender, religion, or nationality, but doesn't prohibit price discrimination based other personal factors.<ref name=":2">{{Cite web |date=25 Mar 2026 |title=Is Dynamic Pricing Legal? |url=https://www.findlaw.com/legalblogs/small-business/is-dynamic-pricing-legal/ |url-status=live |access-date=25 Mar 2026 |website=FindLaw}}</ref> Companies aren't upfront about using other personal factors, because consumers don't like it when they find out they were charged more for the same products than the people around them.<ref>{{Cite web |last=Giansiracusa |first=Noah |date=26 Dec 2025 |title=Algorithmic pricing is scary. It doesn’t have to be. |url=https://www.bostonglobe.com/2025/12/26/opinion/algorithmic-surveillance-pricing-price-discrimination/ |url-status=live |archive-url=https://web.archive.org/web/20251227101111/https://www.bostonglobe.com/2025/12/26/opinion/algorithmic-surveillance-pricing-price-discrimination/ |archive-date=27 Dec 2025 |access-date=26 Mar 2026 |website=The Boston Globe}}</ref><ref>{{Cite web |last=Vedantam |first=Shankar |date=17 May 2016 |title=This Is Your Brain On Uber |url=https://www.npr.org/transcripts/478266839 |archive-url=https://web.archive.org/web/20250908175727/https://www.npr.org/transcripts/478266839 |archive-date=8 Sep 2025 |access-date=26 Mar 2026 |website=NPR}}</ref><ref>{{Cite journal |last=Chen |first=M. Keith |last2=Sheldon |first2=Michael |date=November 3, 2025 |title=Dynamic Pricing in a Labor Market: Surge Pricing and the Supply of Uber Driver-Partners |url=https://www.aeaweb.org/conference/2016/retrieve.php?pdfid=21740&tk=B3G8HTQB |journal=Labor Studies |archive-url=https://web.archive.org/web/20260301024619/https://www.aeaweb.org/conference/2016/retrieve.php?pdfid=21740&tk=B3G8HTQB |archive-date=1 Mar 2026 |via=Google Scholar}}</ref> | Price discrimination is illegal in the U.S. if it is based on race, gender, religion, or nationality, but doesn't prohibit price discrimination based other personal factors.<ref name=":2">{{Cite web |date=25 Mar 2026 |title=Is Dynamic Pricing Legal? |url=https://www.findlaw.com/legalblogs/small-business/is-dynamic-pricing-legal/ |url-status=live |access-date=25 Mar 2026 |website=FindLaw}}</ref> Companies aren't upfront about using other personal factors, because consumers don't like it when they find out they were charged more for the same products than the people around them.<ref>{{Cite web |last=Giansiracusa |first=Noah |date=26 Dec 2025 |title=Algorithmic pricing is scary. It doesn’t have to be. |url=https://www.bostonglobe.com/2025/12/26/opinion/algorithmic-surveillance-pricing-price-discrimination/ |url-status=live |archive-url=https://web.archive.org/web/20251227101111/https://www.bostonglobe.com/2025/12/26/opinion/algorithmic-surveillance-pricing-price-discrimination/ |archive-date=27 Dec 2025 |access-date=26 Mar 2026 |website=The Boston Globe}}</ref><ref>{{Cite web |last=Vedantam |first=Shankar |date=17 May 2016 |title=This Is Your Brain On Uber |url=https://www.npr.org/transcripts/478266839 |archive-url=https://web.archive.org/web/20250908175727/https://www.npr.org/transcripts/478266839 |archive-date=8 Sep 2025 |access-date=26 Mar 2026 |website=NPR}}</ref><ref>{{Cite journal |last=Chen |first=M. Keith |last2=Sheldon |first2=Michael |date=November 3, 2025 |title=Dynamic Pricing in a Labor Market: Surge Pricing and the Supply of Uber Driver-Partners |url=https://www.aeaweb.org/conference/2016/retrieve.php?pdfid=21740&tk=B3G8HTQB |journal=Labor Studies |archive-url=https://web.archive.org/web/20260301024619/https://www.aeaweb.org/conference/2016/retrieve.php?pdfid=21740&tk=B3G8HTQB |archive-date=1 Mar 2026 |via=Google Scholar}}</ref> | ||
==== Perceived fairness ==== | ====Perceived fairness==== | ||
In 2016, a behavioral scientist that works at Uber made clear that the company could prove that people that people are willing to pay more when their phone batteries were low. Uber claimed they “absolutely don’t use that” information, but | In 2016, a behavioral scientist that works at Uber made clear that the company could prove that people that people are willing to pay more when their phone batteries were low. Uber claimed they “absolutely don’t use that” information, but it not legally prohibited, so consumers have to take their word for it.<ref>{{Cite web |last=Mahdawi |first=Arwa |date=13 Apr 2018 |title=Is your friend getting a cheaper Uber fare than you are? |url=https://www.theguardian.com/commentisfree/2018/apr/13/uber-lyft-prices-personalized-data |url-status=live |archive-url=https://web.archive.org/web/20260312173357/https://www.theguardian.com/commentisfree/2018/apr/13/uber-lyft-prices-personalized-data |archive-date=12 Mar 2026 |access-date=26 Mar 2026 |website=The Guardian}}</ref><ref name=":2" /> Price discrimination concerns have also been publicly remediated by claiming the usage of a practice known as "[[steering]]" instead. Steering is dynamically showing more expensive ''options'' based on individual consumer's characteristics, such as being a Mac user.<ref>{{Cite web |last=Kingsley-Hughes |first=Adrian |date=27 Jun 2012 |title=Mac Users Have Money to Spare, Says Orbitz |url=https://www.forbes.com/sites/adriankingsleyhughes/2012/06/26/mac-users-have-money-to-spare-says-orbitz/ |url-status=live |archive-url=https://web.archive.org/web/20250603093545/https://www.forbes.com/sites/adriankingsleyhughes/2012/06/26/mac-users-have-money-to-spare-says-orbitz/ |archive-date=3 Jun 2025 |access-date=26 Mar 2026 |website=Forbes}}</ref> | ||
Not being able to objectively compare prices restricts a consumer's ability to perceive fair pricing. The ability to plan future purchases is also limited, because prices change constantly. From a consumer perspective, the unfavorable aspects algorithmic pricing can outweigh the ability to search and compare online that enables more choices.<ref name=":0" /> | Not being able to objectively compare prices restricts a consumer's ability to perceive fair pricing. The ability to plan future purchases is also limited, because prices change constantly. From a consumer perspective, the unfavorable aspects algorithmic pricing can outweigh the ability to search and compare online that enables more choices.<ref name=":0" /> | ||
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Dynamic pricing involves highly personal and identifying consumer data for individual price determination, which raises serious concerns about privacy.<ref name=":0" /><ref name=":1" /> There is a lack of transparency around that data collection, because often the consumer is ''not'' informed that: | Dynamic pricing involves highly personal and identifying consumer data for individual price determination, which raises serious concerns about privacy.<ref name=":0" /><ref name=":1" /> There is a lack of transparency around that data collection, because often the consumer is ''not'' informed that: | ||
* The sites they have previously visited in their browser and their clicks are tracked to finely infer tastes, income and health status. | *The sites they have previously visited in their browser and their clicks are tracked to finely infer tastes, income and health status. | ||
* Merchants don't have to ask explicit consent to adjust prices based on tracking cookies. | *Merchants don't have to ask explicit consent to adjust prices based on tracking cookies. | ||
This is an informational advantage that companies leverage, which could limit the consumer's ability to objectively compare products online.<ref>{{Cite web |last=Egan |first=Shannon |date=5 Apr 2021 |title=Mapping the Ethicality of Algorithmic Pricing |url=https://montrealethics.ai/mapping-the-ethicality-of-algorithmic-pricing/}}</ref> | This is an informational advantage that companies leverage, which could limit the consumer's ability to objectively compare products online.<ref>{{Cite web |last=Egan |first=Shannon |date=5 Apr 2021 |title=Mapping the Ethicality of Algorithmic Pricing |url=https://montrealethics.ai/mapping-the-ethicality-of-algorithmic-pricing/}}</ref> | ||