money & economicsanalysisPBS NewsHour
How companies are using AI to make you spend more money
Companies have always tried to set prices to maximise profit, but software now lets them do it far more finely. Algorithmic pricing systems analyse demand, stock levels, competitor prices and sometimes data about the individual shopper to decide what each price should be, and can change it many times a day. Airlines and ride-hailing apps have long used 'dynamic pricing' of this kind; AI extends it to groceries, hotels, concert tickets and online retail. With many Americans frustrated by rising costs, regulators and lawmakers are asking whether these tools are simply efficient or whether they let firms squeeze more from each customer.
The software is fed sales history, live demand and competitor prices, then predicts how much customers in each situation will pay. It tests price changes continuously and keeps the ones that raise revenue. When it also uses personal data, such as location or browsing, the price can differ between shoppers.
The fairness question is whether two people can be shown different prices for the same thing, and whether competing firms using the same pricing software end up nudging prices up together without ever speaking to each other. Economists note that variable prices can also lower costs for some buyers and match supply to demand, so the debate is about transparency and limits, not whether pricing should ever change.
Surge pricing by ride apps and yield management by airlines were earlier versions of the same idea, and each prompted a backlash before becoming normal. The new element is how personal and how fast the adjustments can be.
Airlines pioneered computerised revenue management after the US deregulated air fares in 1978.
Illustrative photo · Welche Bedeutung hat Dynamic Pricing Ihrer Meinung nach für…, Public domain, via Wikimedia Commons
