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To surge or not to surge, the algorithm is the question
From rides to burgers, consumers may baulk when differential pricing comes to their favourite real-world businesses.
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Surge pricing is not the only algorithmic manoeuvre that has come under fire when translated offline into non-digital businesses.
PHOTO: UNSPLASH
Rana Foroohar
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Surge pricing is something that anyone who takes a ride-share on a regular basis has become used to. Try calling an Uber or Lyft on a rainy day during the dinner hour or around the school pick-up or drop-off time, and you’ll be paying more than your usual rate – sometimes a lot more.
Yet when consumers are confronted with common online business models like “dynamic pricing” in the bricks-and-mortar world, they may revolt. Consider the recent consumer backlash after Wendy’s, the American fast-food chain, announced on an earnings call that they were considering surge pricing for burgers during peak demand – and had invested US$20 million (S$26.6 million) in new AI systems to do so.
