Key Takeaways:
- Artificial intelligence (AI) is being used to personalize pricing, making it difficult for consumers to compare prices and find the best deals.
- AI algorithms gather personal data from online activities, such as browsing history, search queries, and social media interactions, to determine the optimal price for an individual.
- Dynamic pricing is not regulated in Canada, and the Competition Bureau is currently conducting a public consultation to learn more about the issue.
- Personalized pricing is not limited to online shopping, and has been used in other industries, such as car sales and grocery stores.
- Consumers can take steps to avoid being tracked by algorithms, such as clearing online history and cookies, blocking location services, and shopping in-store with cash.
Introduction to Dynamic Pricing
The use of artificial intelligence (AI) in pricing has become a growing concern for consumers, as it allows companies to personalize prices based on individual online habits. Ruby Szpeflicki, an accounting clerk from Greenwood, N.S., has noticed that prices change daily, making it difficult for her to find good deals. "The prices change daily," she said. "It drives me nuts. I hate it." This phenomenon is known as dynamic pricing, where algorithms adjust prices based on personal information gathered from online activities.
How AI-Powered Pricing Works
Mark Daley, Western University’s chief AI officer, explains that AI-powered pricing has been happening for several years, but the introduction of AI has changed the way data is gathered and used. "AI itself is so dynamic, and we’re just discovering what it can do," he said. When you visit a website, cookies track your data, which can be shared with third parties or used by the company to learn more about you. This data can also be gathered through AI chatbots like ChatGPT, which can profile customers and provide valuable information to companies. As Daley noted, "The more you tell it about who you are, the more information you give it about you, the better it can profile you as a customer, and that data is incredibly economically valuable."
The Impact of AI-Powered Pricing on Consumers
David Dunbar, a lawyer formerly with the Competition Bureau, notes that personalized pricing through AI is a concern because it can lead to a lack of transparency and fairness in pricing. "You’re not getting a rule that applies to everybody," he said. "You’re getting a trillion rules that nobody understands." This can make it difficult for consumers to compare prices and find the best deals. For example, if multiple businesses use AI to determine the optimal price to charge an individual for an item, people can no longer shop around for the best price. As Dunbar explained, "I’m supposed to be able to go from here to there and compare prices and compare attributes to different products and make my choice."
Regulation and Legislation
The use of AI-powered pricing is currently not regulated in Canada, although the Competition Bureau has opened a public consultation to learn more about the issue. The bureau plans to summarize the submissions in a report, which will be available in the coming weeks. However, as a spokesperson noted, "At this stage, the consultation is not intended to result in policy recommendations." This lack of regulation raises concerns about the potential for price gouging and unfair business practices.
Offline Personalized Pricing
Personalized pricing is not limited to online shopping, as Jean-Pierre Dubé, a professor of marketing at the University of Chicago, notes. For example, car dealerships have long used personalized pricing, and grocery stores have been changing prices based on supply and demand. Some stores are now using electronic shelf labels, which can quickly and easily change prices. While this may not be as overt as online personalized pricing, it still raises concerns about the potential for unfair business practices.
Avoiding Algorithmic Tracking
Consumers can take steps to avoid being tracked by algorithms, such as clearing online history and cookies, blocking location services, and shopping in-store with cash. As Mark Daley noted, "It’s up to us collectively as Canadians now to decide what strength of privacy do we want and how much innovation are we willing to forego to ensure that we have privacy." By being mindful of what information is shared online and taking steps to protect personal data, consumers can reduce the impact of AI-powered pricing and ensure a more level playing field.
Conclusion
The use of AI-powered pricing has significant implications for consumers, as it can lead to a lack of transparency and fairness in pricing. While some may argue that personalized pricing can provide benefits, such as more targeted advertising and improved customer experiences, the potential risks and drawbacks cannot be ignored. As Geoffrey Hinton, the "godfather of AI," notes, "AI can be incredibly powerful, but it can also be incredibly dangerous if not used responsibly." Ultimately, it is up to consumers, regulators, and businesses to ensure that AI-powered pricing is used in a way that is fair, transparent, and respectful of consumer privacy.
https://www.cbc.ca/radio/costofliving/ai-pricing-dynamic-shopping-online-9.7039509
