Personalized pricing has become increasingly common in various industries, including finance and online gaming. Recently, Delta Air Lines announced its plan to use artificial intelligence to provide individualized prices to customers, sparking concern among flyers and politicians.
However, this trend is not new. Customized pricing has been around for a long time, with businesses traditionally sizing up each customer and bargaining face-to-face to determine the price paid. The concept was even illustrated in an old joke: a rich man asked if eggs were rare in a neighborhood where he happened to be driving by.
Fast forward to today, most American shoppers don’t bargain but instead see set prices. This shift is largely attributed to John Wanamaker’s Philadelphia department store, which introduced non-negotiable price tags in the 19th century. Set prices have several advantages for businesses, including allowing them to hire low-paid retail workers and simplifying pricing decisions.
However, with the rise of AI-powered pricing, some experts worry about the potential drawbacks. For instance, algorithms can lack transparency and unfairly target financially unsophisticated individuals. Moreover, experiments by the Federal Trade Commission show that AI programs can even collude among themselves to raise prices without human intervention.
To outsmart AI pricing schemes, consumers can take a few steps. Using paper money in brick-and-mortar stores can help deny AI programs data on past purchases and habits. Clearing one’s cache when shopping online is also crucial, as it prevents algorithms from accessing personal information. Furthermore, being aware of location-based price adjustments can help individuals negotiate better prices.
Ultimately, the rise of AI-powered pricing requires a critical examination of how prices are determined. As Jay L. Zagorsky, an associate professor at Boston University, notes, we need to start discussing this topic now before customized pricing becomes ubiquitous.
Source: https://www.independent.co.uk/travel/news-and-advice/ai-dynamic-personalized-pricing-delta-airlines-b2799846.html