AI-Powered Algorithmic Pricing and Monetary Policy

RePEc Short ID: pli18
ORCID iD: 0000-0003-2073-0898

Avaradi, Greeshma; Liu, Zheng; Zhao, Steven

Journal Article

AI-Powered Algorithmic Pricing and Monetary Policy

Abstract: The business practice of adjusting prices using algorithms powered by artificial intelligence—known as AI pricing—has grown rapidly and spread across many sectors in the economy. Unlike traditional price setting, AI pricing uses predictive analysis of large data sets to incorporate real-time changes in supply and demand conditions into pricing decisions. This enables businesses to adjust prices more quickly in response to unexpected changes in market conditions and monetary policy. Industry-level evidence suggests that price adjustments are more sensitive to monetary policy in sectors where AI pricing is more prevalent.