The internet has changed the way we do our shopping. Books, clothing, electronics and even groceries can be purchased online. Pretty much anything you can think of, there is a website that is selling it.
With so many retail options online, we are able to do extensive research to make sure that we are getting the best deals available. But are online retailers charging different prices for the same items to different customers?
A recent report by ProPublica shows that yes, this is indeed happening. It is a result of dynamic pricing, which can lead to unintentional price discrimination.
Dynamic pricing is when online retailers adjust the cost of an item on the fly, as market demand changes. It's controlled by algorithms that take into account such things as the customer's ZIP code, competitors' pricing, level of demand, time of day along with the day of the week. Some online retailers update prices as often as every 15 minutes, so what you pay for a certain item could depend on the time of day you order it.
One example of alleged price discrimination was in 2012 with a travel booking site. At that time, when people did a search for a hotel on the travel site, the higher priced hotels would show up first for those using a Mac. Mac users were not charged more than PC users, but they were shown the pricier hotels as their first lodging options.
More recently, ProPublica says they discovered that the Princeton Review was charging different prices depending on the customer's location. In some ZIP codes, the cost of its SAT tutoring course was $6,600. In other ZIP codes, they were charging up to $8,400 for the same course. The locations being charged more were heavily populated with Asian-Americans.
In Europe, charging different prices to different geographic regions is regulated. However, it is not regulated in the United States so technically, these online retailers are not breaking any laws.
ProPublica's Julia Angwin says it's difficult to see how the algorithms affect people and pricing because everything is contained in a "black box." Many factors are taken into account with these algorithms. The device you use to get to a site, the ZIP code you're in, your browsing history and what operating system you're using are some of the factors.
Angwin is asking people to send in examples of black box pricing on Twitter. Here is one of the responses she got:
— Jason Kint (@jason_kint) September 17, 2016
You could do some research of your own the next time you're looking to make a purchase online. Check the price of the item at different times of the day from different gadgets and see if they are different. You could even have a friend or family member living in a different ZIP code check the price in their area.
Here are some ways to help you find the best deals online:
- Save on Amazon - Amazon is one of the most popular online retailers. Here are five ways to save money on Amazon.
- Traveling app - If you're going to be traveling, there are apps that will help you find the best deals. Read our story on how to save when booking a flight, a hotel, or even a rental car.
- Save on specific items - There are three product categories that you're almost guaranteed better deals online. Click here to find out what they are.
Tell us what you think in the comments section. Let us know if you find any examples of unintended price discrimination.