Does big data increase prices in China?
It seems reasonable that the price of hotels and airlines varies based on seasons, days of the week or the time of a day. However, the advent of setting different prices according to a person's behavior, driven by big data, is fast approaching.
Recently in China, many customers found that websites and apps which help customers book flight tickets, hotels, theaters, taxis, etc. set personalized prices based on the device and their purchasing habits. For example, prices shown on iPhones are higher than on Android and prices will increase for customers who have searched for a product or service many times without any actual purchases.
A netizen complained on his Weibo and made a comparison between two devices.
Yuban12306 said on his Weibo, a Twitter-like social media platform in China, that he once called for taxi with Didi Chuxing using two user accounts, and accidentally found that the prices were different. The price shown for the new account is lower than the old one.
Similarly, a user named Wushengyouliang complained on Weibo that once, when he booked flight tickets and hotels for travel, his schedule changed so he had to cancel his reservation and re-book at the same hotel on a different day. However, when searching the hotel again on the website, the price had been lowered from 168 (around 26.60 US dollars) to 148 yuan (around 23.43 US dollars). But when he canceled his booking and searched again, the price increased again, to 188 yuan (around 29.77 US dollars).
Price discrimination driven by big-data has generated heated discussions on Chinese social media, with some saying that the price differences are reasonable since there are so many factors in the price setting system but most are concerned about privacy, fraud and fairness.
Many companies in China ended up involved in the controversy and Didi Chuxing, the biggest ride-sharing company in China, was almost the first to be mentioned.
In response, Zhang Fu, the chief technology officer of Didi Chuxing, said in an open statement that the company forbids any kind of price discrimination. However, the price might float based on different contexts like price, time and location.
According to economists, price discrimination comes in many forms. The first level of price discrimination is personalized price, which enables vendors and retailers to use personal data to charge a unique price to each customer.
Liu Xin, a professor at the School of Public Administration and Policy of Renmin University of China, told Xinhua News that the development of big data enables the first level of price discrimination. Zhou Tao, a professor at the big data research institute at the University of Electronic Science and Technology of China told Xinhua News that, at a certain level, big data also gives customers discounts, especially for those who are price sensitive.
But is it legal?
Companies made pricing decisions based on aggregating information that had been collected about customers, which definitely relates to concerns about privacy invasion. However, the boundary between collecting legal and illegal data is still blurred in China. However, according to Xinhua News, Price Law in China says this violates the provisions on the interdiction of Fraudulent Pricing.