Publication Date
11-25-2022
Journal
Washington University Law Review
Abstract
Pricing algorithms are rapidly transforming markets, from ride-sharing, to air travel, to online retail. Regulators and scholars have watched this development with a wary eye. Their focus so far has been on the potential for pricing algorithms to facilitate explicit and tacit collusion. This Article argues that the policy challenges pricing algorithms pose are far broader than collusive conduct. It demonstrates that algorithmic pricing can lead to higher prices for consumers in competitive markets and even in the absence of collusion. This consumer harm can be initiated by a single firm employing a superior pricing algorithm. Higher prices arise from the automated nature of algorithms, impacting any market where firms price algorithmically. Pricing algorithms that are already in widespread use may allow sellers to extract a massive amount of wealth from consumers. Because this consumer harm arises even when firms do not collude, antitrust law cannot solve the problem. This Article looks to the history of pricing innovation in the early twentieth century to show how government can respond when new pricing technologies and strategies disrupt markets. It argues for pricing regulation as a feasible solution to the challenges non-collusive algorithmic pricing poses, and it proposes interventions targeted at when and how firms set prices.
Volume
100
First Page
111
Publisher
University of Washington School of Law
Keywords
algorithms, pricing, competition, antitrust, technology, consumer protection, law and economics, innovation
Disciplines
Antitrust and Trade Regulation | Consumer Protection Law | Law | Law and Economics
Recommended Citation
Alexander MacKay & Samuel Weinstein,
Dynamic Pricing Algorithms, Consumer Harm, and Regulatory Response,
100
Wash. U. L. Rev.
111
(2022).
https://larc.cardozo.yu.edu/faculty-articles/545
Included in
Antitrust and Trade Regulation Commons, Consumer Protection Law Commons, Law and Economics Commons
