Pricing is one of the central challenges in business, where companies must figure out the maximum amount that customers are willing to pay for a product. To help with this tricky task, some businesses are rolling out digital pricing systems that allow them to alter prices within seconds. For instance, Walmart is replacing paper price tags with electronic labels at more than 2,300 locations. While the retailer claims this allows them to respond rapidly to rising costs, a growing number of customers fear the labels could be used alongside AI to raise prices when demand is high or to charge different people different amounts. Walmart says it isn't using the labels for those purposes and has promised not to use customers' personal information to set prices. “We price the product, not the person,” said the company's CEO John Furner.

McDonald’s, on the other hand, is increasingly using AI to set prices at its restaurants. The fast food chain offers franchise owners a tool that analyzes sales, location, and competitors’ prices to recommend what they should charge for menu items. But a federal lawsuit alleges that the system uses private sales information from competing restaurants to coordinate prices and reduce competition. The lawsuit claims this drives up costs for McDonald’s customers. The chain denies the allegations and says its franchise owners make their own pricing decisions. For example, only 60 percent of its US restaurants were offering a recent company-proposed menu of 10 items priced under $3, showing that franchisees do not always follow corporate recommendations.

Businesses are still figuring out if AI can improve their pricing decisions. These tools claim to analyze sales, competitors’ prices, and consumer behavior to predict how customers might respond to different prices. But those predictions are not guarantees, and companies must decide how much to rely on them. Businesses also face questions about whether AI pricing could damage customer trust or weaken competition. Lawmakers in at least 30 states have considered bills addressing new pricing practices, and the Federal Trade Commission has warned companies about using personal information to set prices without telling customers. Whether AI can help businesses increase profits without undermining competition or customer trust remains an open question.

Questions:

  1. What are the potential benefits and drawbacks of the digital pricing models used by Walmart and McDonald’s?

  2. Do you think companies risk losing the trust of their customers by relying too heavily on AI tools for tasks like pricing? Why or why not?