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Why Do Gas Station Prices Constantly Change? Blame the Algorithm (wsj.com)
Retailers are using artificial-intelligence software to set optimal prices, testing textbook theories of competition, says a WSJ report. An anonymous reader shares the article: One recent afternoon at a Shell-branded station on the outskirts of this Dutch city, the price of a gallon of unleaded gas started ticking higher, rising more than three-and-a-half cents by closing time. A little later, a competing station three miles down the road raised its price about the same amount. The two stations are among thousands of companies that use artificial-intelligence software to set prices (Editor's note: the link could be paywalled; alternative source). In doing so, they are testing a fundamental precept of the market economy. [...] Advances in AI are allowing retail and wholesale firms to move beyond 'dynamic pricing' software, which has for years helped set prices for fast-moving goods, like airline tickets or flat-screen televisions. Older pricing software often used simple rules, such as always keeping prices lower than a competitor. These new systems crunch mountains of historical and real-time data to predict how customers and competitors will react to any price change under different scenarios, giving them an almost superhuman insight into market dynamics. Programmed to meet a certain goal -- such as boosting sales -- the algorithms constantly update tactics after learning from experience. Even as the rise of algorithms determining prices poses a challenge to anti-trust law, authorities in the United States and Europe haven't opened probes or accused anyone of impropriety for using AI to set prices.
But wont consumers get wise eventually and change their habits around this new system? Dosnt that ruin the historical data - I mean, after all, the historical data was from a non algorithm based system. Millennials are already supposedly shunning advertising; I cant help think they will work around this as well.
Also, in their example, isnt this price fixing? Even if its done by an algorithm?
(didnt read the article, no access)... oh actually, let me try that F12 tip today (from reddit?)
it would have been priced in litres.
If companies are going to start to do dynamic pricing like that ... I wonder how long before someone produces an app that shows you where fuel is the cheapest in your area - maybe crowd-sourcing the data; then the fuel company monitors the app and changes prices based on what it learns ... this could be interesting.
I know the local Valero manager that sets the prices at all the Valeros in town. All she does is drive around and see what Shell and Chevron are charging.
Pretty much just this: https://twitter.com/iamdevlope...
Anti-trust would only come into it if the AI has access to data that has been given to whichever station is using the AI by a competitor (if the AI is fed competitor pricing data because someone looked at the sign board and saw what the competitor is charging, that's fine, if the AI is fed competitor pricing data because the competitor directly gave it to the station using the AI, that's not fine, especially if the pricing data was given before the change was posted to the sign board)
I worked at a gas station owned by a local guy who had a couple gas stations. He was independent and always watched the gasoline bulk market for trends. Also competition factors into gas pricing as well as demand. Its why almost any big holiday you will see a rise in fuel. Sadly a local gas station operator only makes a few cents per gallon, then add in taxes, regulations, and branding requirements. Gas is just gas, but beyond that many things go into gasoline pricing, including cost of ethanol of which much of America blends into gasoline in some amount.
You charge whatever people are willing to pay. I live in one of the wealthy part of the city and prices at the pump are on average 50 more expensive than other parts of the city. Two gas stations nearby my place are always busy even with higher prices. They are underpriced if you ask me. It should a $1 more.
When the price of gas starts to trending to new highs for no apparent reason, you can thank the blind trust of people in AI. ;)
Anons need not reply. Questions end with a question mark.
Since when, exactly, are flat-screen TVs "fast moving" consumer goods?
...gis sdrawkcab (usually not responding to ACs; don't bother posting as AC)
Which shows the closest station as the one that shuts off my gas when my tank is half full. I've told the worker bees, this has gone on for a good 2 years.
Second cheapest is on the way to my aerobics class, so I buy gas there.
Actually, the cheapest are either:
1) The Union 76 station 1 mile away that can't handle my credit card, or
2) Various stations that don't accept credit cards. I'm sorry, gas costs so much I don't carry the cash needed to fill my tank. Debit cards don't have the consumer protections I need to trust them, I don't have one.
In many places in North America the prices are lowest during the middle of the week and highest on the weekends.
There is only 1 cause: GREED.
They can charge more because they have you the customer, literally, over a barrel. Where else are you going to go to buy gas? Gas companies aren't stupid -- it is all about maximizing revenue. So a few customers complain. Big deal.
Back in the 90's during the Gulf War gas prices in Canada went up, even though it _exports_ more gas then it imports. Why? Because "We can. Fuck-You Consumer."
The gas companies don't give a fuck about your. Why would their algorithm?
when you're on your way to work with no time to stop and gets more expensive after work.
This is yet another good example of how the free market isn't. The entire situation is asymmetric. Companies have more information and control supply. If there was more competition maybe, but between buyouts left and right (thanks to enormous cash reserves left from decades of not taxing anyone) and the simple fact that they can watch each other's prices... well the whole system's busted and I don't see anything fixing it short of UBI + single payer healthcare or the like putting power in consumers hands by ensuring basic needs are met.
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Several years ago, an oil company executive was laughing at the tales of offshore ships full of gasoline, just waiting for the price to rise. He said that the companies in California made 34 million gallons per day and had to sell 34 million gallons per day, there being not enough storage to hold the supply back.
The control was relativity easy. Each service station received a fixed amount of gasoline on a regular basis and had to have tank space for the delivery. So a full tank, lower prices. Nearly empty, raise the price.
The problem behind all this is that it would take 200 million gallons of gasoline to fill the tanks of all the cars in California.
I say gasoline since my car runs on gas, Hydrogen! Yeah fuel cell!
I cannot wait to see AI fights, with multiple AI adjusting tactics to each others. Will price converge? Oscillate around equilibrium? Diverge?
God, enough with the "AI software" BS. It is just software running simple algorithms.
Advantage: Electric car. Thanks to my state PUC, I already know what my electricity is going to cost next year.
Most, if not all states only allow one price change per 24 hour period.
Ken
so, if the price ticks up while you are pumping, what price will you actually pay?
Thu Sep 12, 2013 | 2:35 PM BST
New database helps German drivers hunt out cheapest petrol
http://uk.reuters.com/article/germany-petrolstation-pricing-idUKL5N0H82D020130912
Why does a dog lick its balls?
Because it can.
Confucius say, "Find worm in apple - bad. Find half a worm - worse."
so, the response of the one AI was to also higher the price to 'boost sales'?
that is the most stipid AI i ever heard of, instead of leaving your price low and steal all the customers of the other station which did higher it's price.
On a long enough timeline, the survival rate for everyone drops to zero.
We're talking about gas prices. You are cordially invited to choke on me.
"You're right," Fisheye says. "I should have set it on 'whip' or 'chop.'"