Airfare prices, as well as prices for pretty much anything sold online, are about to get a lot more dynamic.
I am something of an airline points obsessive, or worse. I lurk on blogs and some more dodgy corners of the Internet to learn the latest strategies and promotions. I know the stakes are low, but it’s fun — even the outrage, the latest of which was ignited among the Delta flying community when the airline announced it was using AI to set prices.
Its mistake was using the term “dynamic pricing, ” which people interpret as personalized pricing, like charging people more depending on why they’re flying. Delta is not doing that (yet), at least not with AI. But it is coming, not only for airlines but also for many consumer businesses. And we will all hate it — but we should all prepare for it.
“Dynamic pricing,” like consumption taxes or market-rate-rent, is something only an economist can love. Dynamic pricing usually means a price that changes depending on when you buy — say, when Wendy’s wanted to charge less for burgers outside of peak lunch hour. The plan caused such an uproar that it was abandoned. But it would have been better for customers, who could have saved money by eating lunch later (or earlier, if they were hungry).
Continue reading the entire piece here at Bloomberg Opinion (paywall)
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Allison Schrager is a senior fellow at the Manhattan Institute and a contributing editor of City Journal.
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