Browsing by Subject "Inequity"

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Price discrimination with inequity-averse consumers
a reinforcement learning approach
(2021) Buchali, Katrin
With the advent of big data, unique opportunities arise for data collection and analysis and thus for personalized pricing. We simulate a self-learning algorithm setting personalized prices based on additional information about consumer sensi- tivities in order to analyze market outcomes for consumers who have a preference for fair, equitable outcomes. For this purpose, we compare a situation that does not consider fairness to a situation in which we allow for inequity-averse consumers. We show that the algorithm learns to charge different, revenue-maximizing prices and simultaneously increase fairness in terms of a more homogeneous distribution of prices.