Are you paying more for plane tickets or hotels because of your browsing history?
Corporations have long used personal data to target ads to specific individuals. Now, with AI-enabled surveillance pricing, two people might be seeing the same targeted ad, for the same product–with different prices.
Unlike dynamic pricing, which is a feature of open markets and involves prices rising for everyone at peak times based on demand, surveillance pricing involves companies setting a personalized rate for each consumer based on that person’s collected data. That data can reveal your location, income, purchase history, and more.
This practice is already in place, and companies are now using it more frequently. A Federal Trade Commission report from January found that companies can even use your mouse movements on online retailers to infer your buying habits and purchasing power, and use those as factors in setting your personalized price. With this tactic on the rise, it’s time to learn how to recognize surveillance pricing and what you can do about it.
Where Price Point Meets Pain Point
In July, Delta Airlines said that they used artificial intelligence to determine 3% of their domestic fare pricing. By the end of the year (now), their goal was 20%. What does it mean for an airline to use AI to set prices? Delta, and likely other airlines, are going beyond just incorporating general factors that affect anyone–like holidays, storms, and fuel prices. Instead, AI enables them to tailor a price to each individual based on their personal data.
Hotels and online travel agencies are taking the same approach. SFGate reporters found that online travel sites priced the same New York City hotel room at $829 for someone with a Bay Area IP address, and $318 for someone located in Kansas City. Most likely, the logic behind that $500+ difference in price is that a person who can afford to pay Bay Area rent can, and will, pay the higher rate for the hotel room.
Another example of surveillance pricing already documented in action is on ride-sharing apps. “It’s not entirely clear,” said former Federal Trade Commission Chair Lina Khan, “but researchers ran tests and found that riders with lower battery life on their phone were charged more.” She says that through surveillance pricing, companies assign individuals a “pain point”: in other words, the maximum that person is willing to pay for the product or service in their specific moment of need. Companies that can identify and charge a person’s exact price (pain) point will increase their revenue.
The Near-Future of Surveillance Pricing
Consumer advocates argue that marking up prices due to personal misfortune is deeply unethical. “Imagine this,” writes policy analyst Jay Stanley of the ACLU. “A family member has died, and attending their funeral is very important to you. Somehow—you don’t know how—the airlines know this about you, so when you go to buy a ticket they jack up their prices, forcing you to pay more for the same flight than other people.”
Yet Aradhna Krishna, a Professor of Marketing at the University of Michigan, doesn’t see this new capability as all bad. What if companies charged the wealthy more and poorer families less for the same service–wouldn’t that function as a “private-sector progressive tax system” and contribute to wealth equality? As she points out in The Conversation, it’s all about how surveillance pricing is regulated and implemented. As with so many AI-powered technologies, state and federal agencies are only just mapping out the new landscape, and policies will follow.
How to Avoid Paying More
For now, consumers can take a few steps to guard against exploitative surveillance pricing. First, share less data. One way to do that is to use a personal VPN, or virtual private network, which masks your physical location. Use Incognito or Private mode so your browsing history isn’t saved. You can also clear your browsing history regularly to make it harder for surveilling companies to read.
If surveillance pricing practices take root, comparison shopping will become essential. That means checking prices on your phone in one browser and on your computer in a different browser, or asking your friend in another city to check the price for you.
Whether or not surveillance pricing becomes yet another price we pay for the convenience of online shopping, time and legislation will tell.
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