AI pricing

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Delta denies using AI to come up with inflated, personalized prices

AI, AI pricing, Artificial Intelligence, Delta, Policy, predatory pricing, surveillance pricing / /

Delta scandal highlights value of transparency

According to Delta, the company has “zero tolerance for discriminatory or predatory pricing” and only feeds its AI system aggregated data “to enhance our existing fare pricing processes.”

Rather than basing fare prices on customers’ personal information, Carter clarified that “all customers have access to the same fares and offers based on objective criteria provided by the customer such as origin and destination, advance purchase, length of stay, refundability, and travel experience selected.”

The AI use can result in higher or lower prices, but not personalized fares for different customers, Carter said. Instead, Delta plans to use AI pricing to “enhance market competitiveness and drive sales, benefiting both our customers and our business.”

Factors weighed by the AI system, Carter explained, include “customer demand for seats and purchasing data at an aggregated level, competitive offers and schedules, route performance, and cost of providing the service inclusive of jet fuel.” That could potentially mean a rival’s promotion or schedule change could trigger the AI system to lower prices to stay competitive, or it might increase prices based on rising fuel costs to help increase revenue or meet business goals.

“Given the tens of millions of fares and hundreds of thousands of routes for sale at any given time, the use of new technology like AI promises to streamline the process by which we analyze existing data and the speed and scale at which we can respond to changing market dynamics,” Carter wrote.

He explained the AI system helps Delta aggregate purchasing data for specific routes and flights, adapt to new market conditions, and factor in “thousands of variables simultaneously.” AI could also eventually be used to assist with crew scheduling, improve flight availability, or help reservation specialists answer complex questions or resolve disputes.

But “to reiterate, prices are not targeted to individual consumers,” Carter emphasized.

Delta further pointed out that the company does not require customers to log in to search for tickets, which means customers can search for flights without sharing any personal information.

For AI companies paying attention to the Delta backlash, there may be a lesson about the value of transparency in Delta’s scandal. Critics noted Delta was among the first to admit it was using AI to influence pricing, but the vague explanation on the earnings call stoked confusion over how, as Delta seemed to drag its feet amid calls by groups like Consumer Watchdog for more transparency.

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Delta’s AI spying to “jack up” prices must be banned, lawmakers say

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“There is no fare product Delta has ever used, is testing or plans to use that targets customers with individualized offers based on personal information or otherwise,” Delta said. “A variety of market forces drive the dynamic pricing model that’s been used in the global industry for decades, with new tech simply streamlining this process. Delta always complies with regulations around pricing and disclosures.”

Other companies “engaging in surveillance-based price setting” include giants like Amazon and Kroger, as well as a ride-sharing app that has been “charging a customer more when their phone battery is low.”

Public Citizen, a progressive consumer rights group that endorsed the bill, condemned the practice in the press release, urging Congress to pass the law and draw “a clear line in the sand: companies can offer discounts and fair wages—but not by spying on people.”

“Surveillance-based price gouging and wage setting are exploitative practices that deepen inequality and strip consumers and workers of dignity,” Public Citizen said.

AI pricing will cause “full-blown crisis”

In January, the Federal Trade Commission requested information from eight companies—including MasterCard, Revionics, Bloomreach, JPMorgan Chase, Task Software, PROS, Accenture, and McKinsey & Co—joining a “shadowy market” that provides AI pricing services. Those companies confirmed they’ve provided services to at least 250 companies “that sell goods or services ranging from grocery stores to apparel retailers,” lawmakers noted.

That inquiry led the FTC to conclude that “widespread adoption of this practice may fundamentally upend how consumers buy products and how companies compete.”

In the press release, the anti-monopoly watchdog, the American Economic Liberties Project, was counted among advocacy groups endorsing the Democrats’ bill. Their senior legal counsel, Lee Hepner, pointed out that “grocery prices have risen 26 percent since the pandemic-era explosion of online shopping,” and that’s “dovetailing with new technology designed to squeeze every last penny from consumers.”

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Will AI end cheap flights? Critics attack Delta’s “predatory” AI pricing.

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Although Delta’s AI pricing could increase competition in the airline industry, Slover expects that companies using such pricing schemes are “all too likely” to be incentivized “to skew in the direction of higher prices” because of the AI pricing’s lack of transparency.

“Informed consumer choice is the engine that drives competition; because consumers won’t be as informed, and thus will have little or no agency in the supposed competitive benefits, they are more apt to be taken advantage of than to benefit,” Slover said.

Delta could face backlash as it rolls out individualized pricing over the next few years, Slover suggested, as some customers are “apt to react viscerally” to what privacy advocates term “surveillance pricing.”

The company could also get pushback from officials, with the Federal Trade Commission already studying how individualized pricing like Delta’s pilot could potentially violate the FTC Act or harm consumers. That could result in new rulemaking, Solver said, or possibly even legislation “to prohibit or rein it in.”

Some lawmakers are already scrutinizing pricing algorithms, Slover noted, with pricing practices of giants like Walmart and Amazon targeted in recent hearings held by the Senate Committee on Banking, Housing, and Urban Affairs.

For anyone wondering how to prevent personalized pricing that could make flights suddenly more expensive, Slover recommended using a virtual private network (VPN) when shopping as a short-term solution.

Long-term, stronger privacy laws could gut such AI tools of the data needed to increase or lower prices, Slover said. Third-party intermediaries could also be used, he suggested, “restoring anonymity” to the shopping process by relying on third-party technology acting as a “purchasing agent.” Ideally, those third parties would not be collecting data themselves, Slover said, recommending that nonprofits like Consumer Reports could be good candidates to offer that form of consumer protection.

At least one lawmaker, Sen. Ruben Gallego (D-Ariz.), has explicitly vowed to block Delta’s AI plan.

“Delta’s CEO just got caught bragging about using AI to find your pain point—meaning they’ll squeeze you for every penny,” Gallego wrote on X. “This isn’t fair pricing or competitive pricing. It’s predatory pricing. I won’t let them get away with this.”

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Musk’s Grok 4 launches one day after chatbot generated Hitler praise on X

AI, AI assistants, AI behavior, AI benchmarks, AI ethics, AI pricing, AI regulation, Anthropic, antisemitism, Biz & IT, chatbots, elon musk, Google, grok, large language models, linda yaccarino, machine learning, multimodal AI, openai, Twitter, X, xAI / /

Musk has also apparently used the Grok chatbots as an automated extension of his trolling habits, showing examples of Grok 3 producing “based” opinions that criticized the media in February. In May, Grok on X began repeatedly generating outputs about white genocide in South Africa, and most recently, we’ve seen the Grok Nazi output debacle. It’s admittedly difficult to take Grok seriously as a technical product when it’s linked to so many examples of unserious and capricious applications of the technology.

Still, the technical achievements xAI claims for various Grok 4 models seem to stand out. The Arc Prize organization reported that Grok 4 Thinking (with simulated reasoning enabled) achieved a score of 15.9 percent on its ARC-AGI-2 test, which the organization says nearly doubles the previous commercial best and tops the current Kaggle competition leader.

“With respect to academic questions, Grok 4 is better than PhD level in every subject, no exceptions,” Musk claimed during the livestream. We’ve previously covered nebulous claims about “PhD-level” AI, finding them to be generally specious marketing talk.

Premium pricing amid controversy

During Wednesday’s livestream, xAI also announced plans for an AI coding model in August, a multi-modal agent in September, and a video generation model in October. The company also plans to make Grok 4 available in Tesla vehicles next week, further expanding Musk’s AI assistant across his various companies.

Despite the recent turmoil, xAI has moved forward with an aggressive pricing strategy for “premium” versions of Grok. Alongside Grok 4 and Grok 4 Heavy, xAI launched “SuperGrok Heavy,” a $300-per-month subscription that makes it the most expensive AI service among major providers. Subscribers will get early access to Grok 4 Heavy and upcoming features.

Whether users will pay xAI’s premium pricing remains to be seen, particularly given the AI assistant’s tendency to periodically generate politically motivated outputs. These incidents represent fundamental management and implementation issues that, so far, no fancy-looking test-taking benchmarks have been able to capture.

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Anthropic’s Haiku 3.5 surprises experts with an “intelligence” price increase

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Speaking of Opus, Claude 3.5 Opus is nowhere to be seen, as AI researcher Simon Willison noted to Ars Technica in an interview. “All references to 3.5 Opus have vanished without a trace, and the price of 3.5 Haiku was increased the day it was released,” he said. “Claude 3.5 Haiku is significantly more expensive than both Gemini 1.5 Flash and GPT-4o mini—the excellent low-cost models from Anthropic’s competitors.”

Cheaper over time?

So far in the AI industry, newer versions of AI language models typically maintain similar or cheaper pricing to their predecessors. The company had initially indicated Claude 3.5 Haiku would cost the same as the previous version before announcing the higher rates.

“I was expecting this to be a complete replacement for their existing Claude 3 Haiku model, in the same way that Claude 3.5 Sonnet eclipsed the existing Claude 3 Sonnet while maintaining the same pricing,” Willison wrote on his blog. “Given that Anthropic claim that their new Haiku out-performs their older Claude 3 Opus, this price isn’t disappointing, but it’s a small surprise nonetheless.”

Claude 3.5 Haiku arrives with some trade-offs. While the model produces longer text outputs and contains more recent training data, it cannot analyze images like its predecessor. Alex Albert, who leads developer relations at Anthropic, wrote on X that the earlier version, Claude 3 Haiku, will remain available for users who need image processing capabilities and lower costs.

The new model is not yet available in the Claude.ai web interface or app. Instead, it runs on Anthropic’s API and third-party platforms, including AWS Bedrock. Anthropic markets the model for tasks like coding suggestions, data extraction and labeling, and content moderation, though, like any LLM, it can easily make stuff up confidently.

“Is it good enough to justify the extra spend? It’s going to be difficult to figure that out,” Willison told Ars. “Teams with robust automated evals against their use-cases will be in a good place to answer that question, but those remain rare.”

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