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Should Computers Decide How Much Things Cost? | The Walrus https://thewalrus.ca/computers-decide-cost/?
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Technology
Should Computers
Decide How Much
�ings Cost?
If you feel like you’re spending more
online all the time, it might be because
(Celina Gallardo / iStock)
I N THE SUMMER OF 2012, the Wall Street Journal reported that

the travel booking website Orbitz had, in some cases, been
suggesting to Apple users hotel rooms that cost more per night than
those it was showing to Windows users. The company found that
people who used Mac computers spent as much as 30 percent more a OUR LATEST ISSUE
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Should Computers Decide How Much Things Cost? | The Walrus https://thewalrus.ca/computers-decide-cost/?utm_source=pocket-newtab-en-us
night on hotels. It was one of the first high-profile instances where

the predictive capabilities of algorithms were shown to impact 2023 Summer
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Since then, the pool of data available to corporations about each of Your Account
us (the information we’ve either volunteered or that can be inferred
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from our web browsing and buying histories) has expanded
significantly, helping companies build ever more precise purchaser PART OF THE TRUST PROJECT
profiles. Personalized pricing is now widespread, even if many
 Read more about The Trust Project and
consumers are only just realizing what it is. Recently, other how this article �ts in it
algorithm-driven pricing models, like Uber’s surge or Ticketmaster’s
dynamic pricing for concerts, have surprised users and fans. In the
past few months, dynamic pricing—which is based on factors such as
ADVERTISEMENT
quantity—has pushed up prices of some concert tickets even before
they hit the resale market, including for artists like Drake and Taylor
Swift. And while personalized pricing is slightly different, these
examples of computer-driven pricing have spawned headlines and
social media posts that reflect a growing frustration with data’s role
in how prices are dictated.
2 of 13 8/15/23, 20:25
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The marketplace is said to be a realm of assumed fairness, dictated

by the rules of competition, an objective environment where one
consumer is the same as any other. But this idea is being undermined
by the same opaque and confusing programmatic data profiling
that’s slowly encroaching on other parts of our lives—the algorithms.
The Canadian government is currently considering new consumer-
protection regulations, including what to do to control algorithm-
based pricing. While strict market regulation is considered by some
to be a political risk, another solution may exist—not at the point of
sale but at the point where our data is gathered in the first place.
In theory, pricing algorithms aren’t necessarily bad. Prices that are

more responsive to market forces and beyond human intervention
could make some of the buying process more efficient and tailored to
individual buyers. It might also result in pricing being clearer. And,
technically speaking, by using data profiling to accurately assess a
consumer’s willingness to pay (that is, the maximum amount
someone would spend on something), personalized pricing could
meet people where they are financially, creating more opportunity
for some people to buy things they might otherwise not have been
3 of 13 8/15/23, 20:25
able to afford.
Again, that’s in theory. In practice, it sometimes works differently.

Strange things can happen on the way to maximizing profits (the
goal of pricing algorithms writ large). Researchers concluded in 2019
that “relatively simple pricing algorithms systematically learn to
play collusive strategies” as they adjust to constantly meet changes
made by others—even if they’re not designed to do so, nor are able to
communicate with other pricing algorithms. Researchers noted in
2021 that, under this scenario, “the largest gains accrue to a
dominant firm with the most advanced technology and the largest
market share.”
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A 2016 study that tracked for four months the top twenty Amazon
sellers of over 1,600 products came to a similar conclusion. In some
cases, algorithms were changing the prices of items “tens or even
hundreds of times per day” (a frequency difficult for a human to
replicate), creating “a largely winner-take-all marketplace.” The
study showed these same sellers received more positive feedback,
which put them at an advantage when it came to page ranks on
Amazon. In other words, a site that appears to offer vast choices
may, when driven by algorithms, end up offering only limited
options from a few top sellers. Algorithms may also make things
more expensive overall, as lowering prices might simply prompt
competitors to undercut, decreasing the incentive for anyone to drop
prices. If you feel like you’re spending more for things all the time, it
4 of 13 8/15/23, 20:25
might be because you are.
There is also a concern regarding biases inherent in big data. In

2015, ProPublica revealed that prices for the Princeton Review’s
online SAT tutoring packages varied depending on US ZIP codes,
creating the “unexpected effect . . . that Asians [were] almost twice as
likely to be offered a higher price than non-Asians.”
All of which makes regulation necessary but simultaneously difficult

—particularly if the issue is addressed at the point of sale. For
example, a government could implement price controls for consumer
goods, ensuring that we never pay more than a set rate (an idea
that’s also been discussed recently as a temporary solution to rising
grocery prices). But its implementation is not the norm, and its
history would make it a hard sell politically. In fact, market
regulation of any kind is likely to spark a backlash both from
businesses that use tools like personalized pricing to increase profits
and from opposition parties looking for ideological leverage. Given
the recent history of the government’s update to the country’s
broadcasting act—which also had at its core a question about the
commercial value of data and which created a hyperactive discourse
about censorship—a foray into personalized pricing regulation could
prove too perilous to attempt.
The 2022 federal budget bill made updates to Canada’s Competition

Act, but those amendments didn’t deal with algorithmic pricing
directly, and a discussion paper released by Innovation, Science and
5 of 13 8/15/23, 20:25
Economic Development Canada noted that the act needs

improvement due to “[t]he new challenges posed by how data-driven
and digital markets operate.” There are “valid reasons to limit
grounds for intervention in private commerce,” the paper went on
but conceded that the question of how is growing increasingly
complicated. “The public interest is not well-served if competitive
harm is identifiable but the [Competition] Bureau is not sufficiently
empowered to intervene.”
But there may be a way to limit the harms of algorithmic pricing

other than by direct intervention against a seller. To get to the root
of the issue, policy might be aimed much earlier in the shopping
process and could focus on what personal data is available to sellers
in the first place.
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When it comes to our data, consumers are getting a raw deal in many
instances, says Pascale Chapdelaine, associate professor at the
University of Windsor Faculty of Law, who specializes in privacy and
copyright and e-commerce law. For example, the idea of consent
around personalized pricing “is very dubious,” she says, as it’s
almost never explicitly brought to shoppers’ attention before
checkout. Just by virtue of our being online, it’s possible that
information about us is gathered without our informed or explicit
opt-in and is used to dictate how much we pay at checkout. “How can
you consent to something you don’t even understand in advance?” In
many instances, the access we unknowingly grant to our personal
6 of 13 8/15/23, 20:25
data is “disproportionate . . . to what we’re going to get out of this”

as consumers, Chapdelaine says.
One way to begin addressing the problem might be more

transparency in stating that prices are being personalized by
algorithms. But more transparency might simply raise awareness
without fixing anything. Besides, people already know the computers
are up to something. Instead, Chapdelaine advocates for legislating
limits to the use of personal data that could be used to personalize
prices, along with more enforcement from the courts and privacy
commissioner.
For the government, the decision to curtail technology that

businesses know can improve profit margins—particularly as many
retailers and services are still recovering from pandemic losses
—could be a risk, both politically and practically. But having been
accused of losing touch with ordinary people—and specifically the
bills they pay—the government may find that the benefits of tackling
algorithmic pricing and introducing more fairness into our online
marketplace outweigh the costs.
About Colin Horgan (View All Articles)
Colin Horgan is a writer and communications professional in

Toronto.
7 of 13 8/15/23, 20:25
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Should Computers Decide How Much Things Cost? | The Walrus https://thewalrus.ca/computers-decide-cost/?

(Celina Gallardo / iStock)

I N THE SUMMER OF 2012, the Wall Street Journal reported that

night on hotels. It was one of the first high-profile instances where

Start My Subscription Today

• Will AI Actually Mean Weʼll Be Able to Work Less?

The marketplace is said to be a realm of assumed fairness, dictated

In theory, pricing algorithms aren’t necessarily bad. Prices that are

Again, that’s in theory. In practice, it sometimes works differently.

might be because you are.

There is also a concern regarding biases inherent in big data. In

All of which makes regulation necessary but simultaneously difficult

The 2022 federal budget bill made updates to Canada’s Competition

Economic Development Canada noted that the act needs

But there may be a way to limit the harms of algorithmic pricing

data is “disproportionate . . . to what we’re going to get out of this”

One way to begin addressing the problem might be more

For the government, the decision to curtail technology that

About Colin Horgan (View All Articles)

Colin Horgan is a writer and communications professional in

Fund the journalism we need now

When you donate to The Walrus, you’re helping writers, editors,

If you’d like to ensure we continue creating stories that matter to

Will you join us in keeping independent journalism free and

Become A Monthly Supporter

Or make a one-time donation for the year

TAGGED Artificial Intelligence Audio Homepage Shopping

We Don’t Need Could a New Religion Will Universal Basic

The Taliban Is Dangerous to Me.

Enter your email address

By signing up, I consent to The Walrus' Privacy Policy

View all newsletters >>

Support independent Canadian reporting and storytelling

© 2023 The Walrus. All Rights Reserved.

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