The Hidden Costs of Algorithmic Pricing: How Technology Influences What You Pa

Have you noticed any case where you see things you did not think you needed, and bought them at a ridiculous amount because a site recommended that you needed them all because you searched for it some days back? Or the one where you see that it looks like prices are fluctuating on a particular good on one site then you wonder what could be going wrong. Okay, before you begin to wonder, it is just demand and supply trick being played on you by price algorithm.

It wasn't quite long that wendy's Co said they will be selling price to customers based on demand and supply at real time and they were going to be investing 20 million into the technology. They aren't the first to do so, Uber and Bolt also use this algorithm to determine the price of a trip based on demand and supply which they refer to as Surge. This has brought about dynamic pricing and dynamic pricing has in one way imputed inflation into its algorithm.

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While you will expect that the algorithm play fair, it now looks like the algorithm isn't playing fair at all. Prices are going extremely high and when a person's price is high, instead of other to set it lower. We cannot deny that algorithm has its good and bad, and what you would expect from a company is to prioritize profit over user growth and with that, whatever algorithm they are introducing to their product must have that as a priority.

For businesses like amazon, the seller would be required to list their goods at the lowest price but when the amount to be paid for advertising and using Amazon fulfillment services and delivery is looked into, the seller would have no choice but to list the price at a higher price. So instead of seller to reduce the price on Amazon as well as reduce it on other platforms, they just increase it everywhere it is listed including their stores. Although SEC warned Amazon on this practice, their algorithm still makes sure that low priced goods do not see the front page.

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Either we like it or not, price fixing by algorithm is still price fixing and it is dangerous to consumers especially when the product being priced fixed is an essential good and when they do this, they won't compete with one another and it would look like they are not colluding on price since it was the computer advising them on the price to pick. This algorithm use has become a major thing that it is used in housing, medical care insurance, and everything that has to do with sales.

While price algorithms and dynamic pricing might seem like innovative tools for businesses to maximize profits, they often do so at the consumer's expense. By creating artificially high prices and reducing fair competition, these practices can make essential goods and services more expensive and less accessible. As consumers, we must remain aware of these tactics and advocate for more transparent and fair pricing practices to ensure a more equitable market.

Posted Using InLeo Alpha