Artificial intelligence is reshaping the marketplace in ways most consumers are oblivious to.
Through AI and algorithms, businesses can now adjust prices in real time based on market conditions and user data, including who you are, where you are, what you browse, and what companies think you are willing to pay. This often happens without the consumers’ knowledge or consent. Some retail apps even change their prices depending on whether you are inside or outside the store.
Algorithmic pricing has existed since the 1980s, when the airline industry set seat pricing based on supply and demand. However, its usage is rapidly becoming increasingly prevalent with advances in big data, AI, machine learning, real-time analytics, and cloud computing.
Not surprisingly, businesses are embracing AI-powered algorithmic pricing in a range of sectors, including e-commerce, housing, ride-sharing, travel, and hospitality.
Proponents maintain that it allows them to react swiftly to market changes, broaden market coverage, improve efficiency, provide a competitive advantage in fast-paced markets through personalized offers, and boost revenue and profits.
“Generally, pricing algorithms are economically beneficial as they intensify competition, incentivize innovation and increase availability of goods and services,” Liam MacDonald, the director of policy and government relations at the Canadian Chamber of Commerce, said in a recent submission to the Competition Bureau after the federal agency released a discussion paper on algorithmic pricing.