UVA study finds pricing algorithms may drive up costs for shoppers

CHARLOTTESVILLE, Va. (WVIR) - Researchers at the University of Virginia have found that some computer programs used by retailers to set prices may result in customers paying more for everyday items.

The study showed that when one company uses a fast, highly responsive pricing system, competing businesses often end up raising their prices as well, even though they are not coordinating with each other. Researchers explained that companies with slower pricing systems tend to adjust their prices to match what they see in the market, creating a ripple effect that gradually pushes prices higher for everyone.

“A single company with a sophisticated algorithm could actually cause prices to go up for everyone, and that is even if the rival companies do not even know that they are competing against this algorithm and they do not have algorithm technology themselves,” said Alexander MacKay, a professor of economics at UVA.

Researchers said the pattern ultimately costs shoppers more than they would typically pay under normal competitive conditions. They are now calling for closer attention to how these pricing tools are used and whether they are quietly contributing to higher prices without consumers realizing it.

The study adds to growing concerns about the role automated pricing systems play in shaping competition and consumer costs across a range of industries.

Do you have a story idea? Send us your news tip here.