Algorithmic Pricing: Implications for Consumers, Managers, and Regulators

Over the past decade, an increasing number of firms have delegated pricing decisions to algorithms in consumer markets such as travel, entertainment, and retail; business markets such as digital advertising; and platform markets such as ride-sharing. This trend, driven primarily by the increased availability of digital data and developments in information technology, has economic and social consequences that are not yet well understood. The aim of this paper is therefore to examine various implications and challenges of algorithmic pricing for consumers, managers, and regulators. We contribute to the literature by defining and classifying algorithmic pricing, understanding managers' perceptions and adding empirical evidence on its use, raising important considerations for the three stakeholders, and finally outlining research priorities in this area.