In this study, we follow an interpretive review approach (Suddaby et al. Since a host of differing methods are available to review and synthesize academic literature, a few words are in order concerning our proceedings. As such, it may be perceived as unethical by consumers and the public, which in turn can adversely affect the firm.įurther, we strive to connect to ethical debates on algorithmic accountability and algorithmic governance so as to highlight practical implications and the use of algorithmic pricing mechanisms. Algorithmic pricing can go along with different forms of price discrimination (in both a technical and moral sense) between individuals and/or groups. One core contribution of the review is a refined and ethically informed definition of algorithmic pricing (for details on a comparison with alternative definitions see chapter “ Concepts and Definitions” below): Algorithmic pricing is a pricing mechanism, based on data analytics, which allows firms to automatically generate dynamic and customer- specific prices in real- time. By delimiting such aspects that can without controversy be deemed morally good or bad from concerns still requiring deeper exploration, we show where research gaps exist and opportunities for future research lie. Overall, we contribute to the literature by making accessible to researchers and practitioners the current state of relevant marketing, law, economic, management, and computer science literature about algorithmic pricing. Future research would, of course, have to amend our endeavor both by delving deeper into each of the surveyed schools and by augmenting the list with further ethical theories (such as for instance, care ethics Footnote 1). While by no means exhaustive, this list of schools is to serve as a first approximation to the subject. Adducing arguments from deontology, teleological, consequentialist ethics, social contract theory, and utilitarianism, we conclude with suggestions of how these major schools of ethical thought would characterize the morally relevant aspects of algorithmic pricing. By mapping the micro, meso, and macro levels of algorithmic pricing, we discuss how ethical aspects of algorithmic pricing relate to individual and aggregate agency within society. In what follows, we examine research literature on pricing algorithms in general, ethical and legal issues, pricing policies, personalization models, inventory management, and electronic retail. Our article wants to make a first step in the direction of closing this lacuna.īy a systematic review of the literature from a business and marketing ethics perspective, we offer a first chart of the topical territory, clarifying the underlying concepts and structures of algorithmic pricing and showing where major ethical problems arise. 2015), a comprehensive ethical understanding of the expanding subject is still lacking (Buhmann et al. Although research on algorithmic pricing has substantially increased in the last decade (Ajorlou et al. Rather, they constitute potentially a thoroughgoing revolution in how humans and algorithms interact commercially, online as well as offline. The capacities of this new generation of algorithms, we hold, are not mere technicalities to be silently passed over. Today’s algorithms are far more advanced than any beverage vending machine one could think of decades ago. However, where until recently, fixed and uniform prices seemed to be the pillar on which the capitalist edifice rested, algorithms are now in charge to observe customers and set prices dynamically and even personalized according to identified customer features (Chen and Gallego 2019 Chen et al. 20 years after, the temperature-sensitive vending machine remains a rumor. In the public outcry that followed Ivester’s remarks, Coca-Cola faced accusations of gouging and consumer exploitation, as people firmly rejected the idea of such a machine (Leonhardt 2005). The machine will simply make this process automatic.” (Phillips 2005, p. So it is fair it should be more expensive. In a final summer championship, when people meet in a stadium to enjoy themselves, the utility of a chilled Coca-Cola is very high. For him, the answer was clear: “Coca-Cola is a product whose utility varies from moment to moment. Would you pay more for a Coke on a hot day? As early as 1999, Douglas Ivester the CEO of Coca-Cola discussed the potential introduction of temperature-sensitive vending machines that adjusts the price according to the outside temperature (Phillips 2005).
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