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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.
A little but the average person has a consistent schedule. They drive by the same stations at the same time 5 days a week.
It is tough to alter real life schedules enough to take advantage of lower gas prices at noon when they raise the rates 3 cents a gallon between 6-9 am and 4-7pm every week day and 5 cents a gallon on the weekends.
i thought once I was found, but it was only a dream.
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.
Uh, a very transparent market of highly substitutable goods is much closer to ideal competition than most. Sure they play little tricks to nudge out those extra cents of profit but it's important to realize that it makes a huge difference for them if the margin is 2% or 5%. If you're paying $1.02 or $1.05 not so much. If you made it a state monopoly it'd probably cost $1.50 because nobody has strong incentive to make it cheaper, it'll sell because people need it and they can't have it from anywhere else. Socialism is great when there's clear reasons why the market would be dysfunctional. Like:
1. Society would benefit more than the individual, like public transport or immunization programs. This may also include indirect costs like more tax earnings, less benefits, lower crime, lower pollution etc.
2. The nature of the service or economics of scale make it a natural monopoly, like water pipes or a sewage system. The installation and maintenance can be still be contracted out though.
3. The terms are so vague or complex that profit-seeking companies try to bait and switch, like for example in healthcare. Also it's often too urgent and serious to be stuck in court over an insurance dispute.
It's actually the last one I see fail the most but usually it's just incompetence, they blame the profit seeking companies when in reality it's a failure to properly specify what they want, the quality they want it in, how it will be monitored and to have sufficient penalties. That's what you ask companies for, what's the cheapest price you can deliver something that fulfills the minimum requirements. Don't act so surprised when they deliver by cutting anywhere they can.
Live today, because you never know what tomorrow brings
Nothing in your grocery store is like that; there is lots of supply/demand, seasonal, and loss leader pricing.
Around here, I see a lot of similarly wildly varying grocery store pricing that segments the market into the price-conscious and the price-oblivious. Big discounts every 2-12 weeks so that the canny can stock-up and avoid being driven to cheaper brands, while in-between, big margins are extracted from the wealthy, uninformed, busy, and unorganized.