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WSJ: Gas Station Prices Constantly Change Due to AI Software

WSJ: Gas Station Prices Constantly Change Due to AI Software
(AP/Seth Perlman)

By    |   Tuesday, 09 May 2017 11:33 AM

Gasoline retailers reportedly are using artificial-intelligence software to set optimal prices, testing textbook theories of competition. Antitrust officials worry such systems raise prices for consumers.

“In economics textbooks, open competition between companies selling a similar product, like gasoline, tends to push prices lower. These kinds of algorithms determine the optimal price sometimes dozens of times a day. As they get better at predicting what competitors are charging and what consumers are willing to pay, there are signs they sometimes end up boosting prices together,” The Wall Street Journal reported.

“Advances in A.I. 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,” WSJ.com reported.

“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,” the Journal reported.

Ulrik Blichfeldt, chief executive of Denmark-based a2i Systems A/S, whose technology powers some Rotterdam gas stations, said his software is focused primarily on modeling consumer behavior and leads to benefits for consumers as well as gas stations. The software learns when raising prices drives away customers and when it doesn’t, leading to lower prices at times when price-sensitive customers are likely to drive by, he said.

“This is not a matter of stealing more money from your customer. It’s about making margin on people who don’t care, and giving away margin to people who do care,” he said.

Meanwhile, the average price of a gallon of regular-grade gasoline dropped 5 cents nationally over the past two weeks, to $2.41, the Associated Press reported.

Industry analyst Trilby Lundberg of the Lundberg Survey said Sunday that the drop reflected lower costs for crude oil, as well as abundant gas supplies.

She says the national average is 14 cents a gallon above the price a year ago.

Gas in San Francisco was the highest in the contiguous United States at an average of $3.02 a gallon. The lowest was in Tulsa, Oklahoma, at $2.02 a gallon.

The U.S. average diesel price is $2.57, down 2 cents from two weeks ago.

(Newsmax wires services contributed to this report).

© 2020 Newsmax Finance. All rights reserved.


   
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Gasoline retailers reportedly are using artificial-intelligence software to set optimal prices, testing textbook theories of competition.
Gas, Station, Prices, Software, artificial, intelligence
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2017-33-09
Tuesday, 09 May 2017 11:33 AM
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