Algorithmic pricing

• Published in: InDret no. 3
• Main Author: Van Heusden, Adrianus
• Format: Journal Article
• Language: English
• Published: Universitat Pompeu Fabra 28.07.2023; Universitat Pompeu Fabra Department of Law
• Subjects: Algorithmic Pricing, Consumer Protection, Consumer Welfare, Law and Economics, Personalization
• ISSN: 1698-739X; 1698-739X
• DOI: 10.31009/InDret.2023.i3.08

The rise of algorithmic pricing has transformed perfect price discrimination from a theoretical concept into a real possibility. Through self-learning pricing algorithms, a strategy can be developed that approximates consumers’ reservation prices with ever-improving accuracy. This paper analyzes algorithmic pricing from a law and economics perspective to identify the efficiency and equity effects that the practice could cause and determine to which extent it is regulated under the current legal framework. This paper finds that under competitive market conditions, algorithmic pricing could be welcomed from an efficiency perspective, but from an equity and ethical perspective serious concerns need to be raised. If these concerns are to be taken seriously, the legal framework provides only a partially functional approach to address algorithmic pricing. Additional appropriate remedies are, therefore, needed to protect consumers adequately and effectively against exploitation that reduces their welfare.