AI and Dynamic Pricing: What Buffalo Consumers Need to Know About Changing Prices

BUFFALO, N.Y. — Planning a trip can mean watching prices jump from one search to the next, but how much of that is supply and demand, and how much could be driven by artificial intelligence? As companies turn to increasingly sophisticated pricing systems, questions are growing about whether personal data could influence what consumers pay.

According to AAA Western and Central New York Group Travel Manager Melissa Peterson, changing prices don't automatically mean artificial intelligence is targeting you, since travel prices can shift with demand, availability and how many seats are left.

“Air travel probably has the biggest fluctuation," said Peterson. "The airlines are very known for different times of day, different days of the week; they'll adjust their pricing. They also adjust it based on who’s looking and when.”

Petersen said those fluctuations aren’t new. What's changing is how quickly computer systems can respond.

“It can change by the minute on availability," said Petersen. "But also, pricing. So, as an agent, I’ve had a flight booked and the fare stored, but sometimes the fare has changed even before I’ve ticketed it.” 

But there’s a bigger question. Putting aside overall demand, could a company use what it knows about you to decide how much to charge? University at Buffalo pricing expert Mike Mingcheng Wei said personalized pricing can turn consumer data into a powerful tool for businesses.

“Trying to predict how much money you’re wanting to pay for each individual product, or more importantly, which product you are wanting to purchase in the future," said Wei.

There is an important distinction: Using broad market trends to set prices isn’t the same as using personal information to predict what one specific customer is willing to pay.

“If you use my personalized, individualized or personal-level data, then I’m going to be concerned," said Wei. "I don’t mind if you’re using an aggregate level of data.”

James Sun, founder of AI company Kapnova, said businesses can use AI to improve profits, but they need to recognize where optimization becomes exploitation.

“To take advantage of one person's situation or action or behavior, I think it crosses the line," said Sun. "I would probably consider that unethical.”

Sun said consumers should know when personalized pricing is in play. And for travelers, Petersen recommends comparing options and using expertise to spot deals before they disappear.

“The biggest key is that AI is huge; the computers are doing work for us, but travel agents can do it better," said Petersen.

The bottom line is a price that changes doesn't necessarily mean AI is targeting you. But as pricing technology evolves, knowing what drives those changes — and what data companies use — could become increasingly important.