By Fred Fuller
By now, you may have heard about “dynamic pricing.” This can refer to the practice of businesses changing the cost of items or services based on different times of the year or changing market demands, which is nothing new. Prices might be reduced if products are not selling, if they are overstocked, are out of season, are nearing their expiration date, or if similar products are being sold by a competitor at a lower price. This can be good for consumers. But prices can also be raised if they are in high demand or if there are shortages, and this can lead to “surge pricing,” which can be price-gouging.
More recently, with the rise of computers and artificial intelligence, a new type of dynamic pricing is being used to change the price of items or services depending on who is buying. It’s being called “surveillance pricing” by consumer advocates and “personal pricing” by the businesses that use it. Other experts call it “personalized price-gouging.”
If a company knows your individual buying habits, they might raise the cost of items that they know you always buy, so that the higher price is the only one you see when you shop for those items. People who are buying the items for the first time would see them listed at a lower price to encourage them to buy. This is made possible through the tracking by stores and mail-order businesses of every item that we purchase, and the analysis of that information by Artificial Intelligence or “A.I.”
The goal of surveillance pricing is for a business to use the data collected on an individual to determine the highest price that an individual customer is willing to pay for products or services.
Delta Airlines announced this past summer that it will be using A.I. to set 20 percent of its ticket prices for domestic flights by 2026. Delta denies that it will use this technology for personalized pricing, but its announcement raised the concern that it could use personal data, such as location, family relationships, methods of purchasing the tickets, etc., to analyze how much a customer might be willing to pay for tickets.
Of course, it’s not usually possible to change the price of an item if it’s in a brick-and-mortar store and there is a price sticker on it. But I’m seeing sticker pricing less and less, while even shelf pricing seems haphazard these days. And can you trust the prices you find on your smartphone when you’re comparing prices?
Some large brick-and-mortar store chains are starting to use “electronic shelf labels” or “ESLs” to show the price of items. These can take the form of an LCD display or an “e-paper display,” attached to the front of a shelf where the items are displayed. E-paper
displays look like actual paper and are black and white, but they can be electronically changed instantaneously. Either type of ESL can be constantly controlled by a central computer that makes dynamic pricing very simple. Walmart purportedly has plans to install ESLs in 2,300 stores by 2026.
ESLs will allow for all kinds of in-store surveillance pricing. Last fall, the Kroger grocery store chain was revealed to be considering the use of facial recognition technology in some of its stores to recognize the age and gender of shoppers by embedding cameras and sensors in refrigerator and freezer glass doors that are see-through. This would allow digital ads to be displayed that are customized for the shoppers recognized and possibly also for surveillance pricing based on those customers.
Kroger has insisted the sensors do not collect or keep shoppers’ data and that Kroger does not seek to identify customers through facial recognition technology—only to detect customers’ presence, dwell time, and the freezer doors that they open.
Kroger has also denied that it uses facial recognition for surveillance pricing. However, Kroger’s privacy policy states that it does collects biometric and facial recognition data to prevent shoplifting and fraud.
There are many other ways that businesses can use electronic surveillance to identify customers and focus on their preferences and behaviors. If shoppers are using an online store app to check prices, a business might be able to use the geolocation of their smartphones to offer them particular deals and offers. Or even if a customer simply has the store’s app on their phone, Bluetooth beacons may ping the app to record the customer’s entrance to the store.
A Target store was found to have charged $100 more for a TV on its app when the consumer was in the vicinity of the store versus farther away, because Target had determined consumers are willing to pay more the closer they are to a store.
All this is made possible by the huge amount of data that can be collected using A.I. for surveillance pricing. Some consumer organizations warn that loyalty cards and rewards programs may not really save us money in the long run, because these programs are one of the best sources for the data that is collected on individual consumers. Fuel and flight rewards can show our travel patterns, store rewards document everything we buy, restaurant and hotel clubs can help profile us, and from all this data, our personal characteristics can be compiled by data brokers who then sell that information to whoever is willing to pay for it.
A report from Vanderbilt University and U.C. Berkley Center for Law and Economic Justice states:
“The breadth of these practices and the continued development of targeting capabilities stems from systematic and deliberate design. Armies of statisticians,
data scientists, AI and machine learning engineers, and researchers have been enlisted and embedded into companies to focus on how to hack people’s brains. Nearly every major retailer has long had a “predictive analytics” department. In recent decades, research across cognitive science and academic institutions has deepened our understanding of how habits take shape in the brain. An entire field of “Nudge” economics and behavioral science has emerged — showing how defaults influence organ donation, to how grocery store layouts affect impulse buying, to how app notifications keep people engaged.”
Both this report and a report by the Electronic Privacy Information Center conclude that much stronger privacy laws are needed to curtail this fast-growing exploitation of our personal data. You can find out more about these issues at the following links:
The Loyalty Trap: How Loyalty Programs Hook Us with Deals, Hack our Brains,
and Hike Our Prices (Vanderbilt University and U.C. Berkley Center for Law and Justice) https://cdn.vanderbilt.edu/vu-URL/wp-content/uploads/sites/412/2025/10/17195957/The-Loyalty-Trap.pdf
Kroger’s Surveillance Pricing Harms Consumers and Raises Prices, With or Without Facial Recognition (Electronic Privacy Information Center) https://epic.org/krogers-surveillance-pricing-harms-consumers-and-raises-prices-with-or-without-facial-recognition
Cyber Monday: The problem with surveillance pricing (1A Podcast, WAMU, NPR) https://the1a.org/segments/cyber-monday-the-problem-with-personalized-pricing
