Pricing algorithms gang up to overcharge customers!

Feb 13, 2019, 6:41 AM EST
(Source: Elaine Smith/flickr)
(Source: Elaine Smith/flickr)

Recently, I was shuttling back and forth between two popular ride-hailing apps in India – Uber and Ola. The reason, I was reluctant to freeze a ride was the steep fluctuations of pricing, which was zig-zagging within a range of 20-30 percent.

After a point, I started pitying myself over what I doubted was a conspired “coincidence,” as both the apps seemed to have colluded to show me bloated fares, and the swings were more or less in sync.

Who is estimating those fares. For your information – pricing algorithms. With a new experiment, it turns out, that pricing algorithms, if left to their own devices, can collude to raise the prices, putting the interests of the customers on backburner, writes MIT Technology Review.

The finding has huge implications because ride-hailing apps, airlines, hotels and many more industries are increasingly relying on such algorithms.  These algorithms learn collusion by trial and error, leaving no signs of any “foul play” while inflating the prices as they respond to one another’s behavior, reports Popular Mechanics.