55: Turbocharging The Price You Pay In 170 Secs
Burgernomics describes what happens to the price of products & services when Dynamic Pricing and A.I. are combined.
- Traditionally, the law of supply and demand dictates prices in the marketplace, where buyers and sellers agree on a price based on publicly available information.
- Dynamic Pricing, a system increasingly employed by sellers, adjusts prices continuously based on buyer demand. This dynamic nature allows sellers to maximize profits.
- However, the twist comes when the purchase price isn't publicly visible. Imagine searching for an item online and the price presented to you is determined by complex algorithms analyzing your personal data.
- This lack of transparency leaves consumers feeling uneasy, leading to calls for government intervention. But in a capitalist market economy, where willing buyers dictate prices, intervention becomes complicated.
- The integration of algorithms and data mining into dynamic pricing turbocharges the traditional supply and demand law, promising benefits like reduced business risk, increased profits, employment, and tax revenue.
- Yet, this advancement poses a significant challenge. With online spending skyrocketing, it becomes increasingly difficult for statistical agencies like the Australian Bureau of Statistics to produce accurate consumer price index (CPI) data. The CPI is crucial for economic policies, including setting mortgage rates by the Reserve Bank.
Conclusion:
As technology reshapes the way we buy and sell goods, the implications of dynamic pricing extend far beyond individual transactions. It challenges traditional economic models and raises questions about fairness and transparency in the marketplace.
Turbocharging The Price You Pay In 105 Seconds
You are entering an era when you’ll probably be paying more for many items you buy, but you’ll never realise it.
Traditionally the law of supply and demand, means buyers and sellers agree on a price based upon the same publicly available marketplace information. Think of product prices on the internet or bidders at an auction, everyone hearing each others bids.
A system called Dynamic Pricing assists sellers to get the highest price by continuously decreasing or increasing the price (thats the dynamic bit) according to buyer demand.
The changing price is publicly visible, so you make your own decision when to buy or not buy.
Just like betting on a horse, the odds you back the horse at, change continuously the closer to the race start. Or your selling your home and you need to drop the price because no one is interested.
Now what if the purchase price wasn’t publicly visible?
Lets say, you search for an item on the internet.
The sellers web site instantaneously processes a plethora of your personal income and spending data using artificial intelligence, calculating the highest price you’ll pay and that is the only price presented to you.
But you don’t know if others are paying more or less for the same item. You are deprived of price information traditionally available for your purchase decision.
Feeling ripped off, Australian’s will ask government to intervene.
But our government operates a capitalist market economy.
In which those that are willing to pay, do.
And those unwilling to pay, aren’t forced to.
Turbocharging the 250 yr old law of supply and demand with algorithms, data mining and dynamic pricing will reduce business risk, increase profits, employment and tax revenue, all very appealing to governments short of money.
But there is one big problem with turbocharged dynamic pricing. As Australian’s online spending spirals past 18% of all retail spending, it will become impossible for the Australian Bureau Of Statistics to produce believable consumer price index statistics when everyone is paying different prices for the same article. Remember the CPI index is used by the Reserve Bank to set your mortgage payment.
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