AI IS CHANGING THE PRICE YOU PAY-BUT WHO'S KEEPING IT HONEST, AND WHAT'S THE PARTICULAR SIGNIFICANCE FOR AFRICA?

Artificial intelligence (AI) is no longer a futuristic concept in today's hyper-connected and fiercely competitive global landscape. It is overhauling even the bedrock of business operations.

- Tshilidzi Marwala

Pricing, once the carefully guarded territory of economists, marketing experts, and strategists, is now increasingly orchestrated by algorithms that learn, predict, and adapt with remarkable precision. AI's growing influence on pricing strategies, particularly through individualized and dynamic pricing, unlocks new opportunities for businesses to optimize revenue, personalize customer experiences, and react swiftly to market changes. Yet, this powerful transformation casts a long shadow of ethical, regulatory, and transparency challenges that demand urgent attention.

The engine driving AI's impact on pricing is its ability to handle and dissect colossal datasets at speeds and depths far beyond human capability. AI systems can continuously refine pricing strategies by interpreting real-time variables, from consumer behavior and inventory fluctuations to demand, competititor pressures, and broader economic indicators. This empowers businesses to transcend static models and embrace fluid pricing systems that adjust dynamically to changing circumstances.

One of the consequential facets of AI-driven pricing is its ability to implement true personalization. AI can segment customers into ever-finer groups or even tailor-made individual offers by analyzing digital footprints, purchasing histories, geographic contexts, and demographic profiles. This can lead to individualized pricing, an issue identified in the 2017 book I coauthored with Evan Hurwitz titled Artificial Intelligence and Economic Theory. Individualized pricing results in two shoppers browsing the same online store but being shown different prices for the same item, based on their predicted willingness to pay.