When five Business Insider employees ordered identical Big Mac meals from the same McDonald's location via Uber Eats, they expected to pay the same price. Instead, their bills varied by 15 to 20 cents—a discrepancy driven by algorithmic pricing, a practice that uses personal data to set individualized costs. This phenomenon, often called 'surveillance pricing,' is becoming more common in e-commerce, delivery services, and beyond, raising questions about fairness, transparency, and consumer trust.
How Algorithmic Pricing Works and Why It Matters
Algorithmic pricing leverages artificial intelligence and vast datasets to adjust prices in real time based on factors like location, payment method, browsing history, and even device type. While dynamic pricing has long existed in industries like airlines and hotels, the rise of e-commerce and mobile apps has expanded its reach into everyday transactions, from food delivery to grocery shopping.
The practice is particularly prevalent in New York, where state lawmakers recently passed legislation requiring companies to disclose when they use personalized algorithmic pricing. Uber Eats, Seamless, and DoorDash now include disclaimers in their apps, though critics argue the warnings are buried and unclear.
The Controversy Over 'Surveillance Pricing'
Critics argue that algorithmic pricing exploits information asymmetry, charging consumers more when they’re willing to pay it. A 2025 Federal Trade Commission report found that companies are investing heavily in data collection to refine these pricing models, often without full transparency.
There are a lot of retailers who are paying a lot of money to get a lot of data—personalized information about consumers—and they're doing it for a good reason. — Oren Bar-Gill, NYU Law and Economics Professor
Companies defend the practice, claiming it allows for flexibility in pricing, such as discounts during off-peak hours. However, instances like Instacart’s 2024 experiment—where identical grocery orders had wildly different prices—have fueled skepticism.
Why Your Big Mac Costs More Than Your Coworker's
In Business Insider’s experiment, the base price of the Big Mac meal remained the same, but delivery fees varied. Some users paid $3.25, while others were charged $3.45, even when sharing the same delivery driver. Uber declined to explain the discrepancy, citing New York’s 'poorly drafted' disclosure law.
The lack of transparency is a key concern. Unlike in-store purchases, where prices are visible to all, digital transactions obscure pricing logic, making it difficult for consumers to compare costs or understand why they’re being charged more.
The Broader Implications of Personalized Pricing
If algorithmic pricing becomes widespread, consumers may face individualized costs for everything from airline tickets to rental cars. While companies argue this maximizes efficiency, critics warn it could lead to a regressive redistribution of wealth, disproportionately affecting those unaware of the practice.
Is Algorithmic Pricing Here to Stay?
Despite backlash—such as the 2024 Wendy’s dynamic pricing controversy and Delta’s AI fare experiment—experts believe algorithmic pricing will only grow. Arnab Sinha of Boston Consulting Group warns that companies must balance profitability with fairness to avoid public backlash.
If it starts becoming unfair, there will be public backlash. — Arnab Sinha, Boston Consulting Group
- Algorithmic pricing uses personal data to set individualized costs, often without clear disclosure.
- Business Insider’s experiment found 20-cent price differences for identical Uber Eats orders.
- Critics argue the practice exploits consumers, while companies defend it as a market efficiency tool.
Frequently Asked Questions
- What is algorithmic pricing?
- Algorithmic pricing uses AI and personal data to adjust costs in real time, often based on factors like location, payment method, or browsing history.
- Is algorithmic pricing legal?
- Yes, but some jurisdictions, like New York, require companies to disclose when they use personalized pricing. The practice remains largely unregulated.
- How can consumers avoid paying higher prices?
- While difficult, consumers can try clearing browsing data, using private browsing modes, or comparing prices across platforms to identify discrepancies.
