Why Do Gas Station Prices Constantly Change? Blame the Algorithm

Retailers are using artificial-intelligence software to set optimal prices, testing textbook theories of competition, says a WSJ report. An anonymous reader shares the article: One recent afternoon at a Shell-branded station on the outskirts of this Dutch city, the price of a gallon of unleaded gas started ticking higher, rising more than three-and-a-half cents by closing time. A little later, a competing station three miles down the road raised its price about the same amount. The two stations are among thousands of companies that use artificial-intelligence software to set prices (Editor's note: the link could be paywalled; alternative source). In doing so, they are testing a fundamental precept of the market economy. [...] Advances in AI are allowing retail and wholesale firms to move beyond 'dynamic pricing' software, which has for years helped set prices for fast-moving goods, like airline tickets or flat-screen televisions. Older pricing software often used simple rules, such as always keeping prices lower than a competitor. These new systems crunch mountains of historical and real-time data to predict how customers and competitors will react to any price change under different scenarios, giving them an almost superhuman insight into market dynamics. Programmed to meet a certain goal -- such as boosting sales -- the algorithms constantly update tactics after learning from experience. Even as the rise of algorithms determining prices poses a challenge to anti-trust law, authorities in the United States and Europe haven't opened probes or accused anyone of impropriety for using AI to set prices.