Consumers are now better equipped to fight the ancient art of the “rip-off.”
Travel organizations are using AI in plenty of ways. Destination marketing organizations use it to answer traveler questions and help them plan itineraries. Airlines and hotels use it to project passenger demand and model buyer behavior. Several companies (to varying degrees of success) use it to write descriptions or summarize information into easily digestible tidbits.
A new essay from The Economist suggests that consumers, too, are using AI to their advantage, and it’s making the products they buy cheaper. With a “genius in our pocket,” they reason, consumers are now better equipped to fight the ancient art of the “rip-off”—whether it’s a real estate agent or a plumber or a hotel charging them more than they should for their services.
A couple of examples highlight how AI has helped consumers spend less money than when they didn’t have information at their fingertips. The two that the author identifies in the story are both travel-related: the first is about cab drivers taking circuitous routings to drive up the fare, the second is about a notorious chain of tourist trap restaurants in greater London.
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In the first example, consumers have largely moved to rideshare apps instead of taxis, to reap benefits like tracked trips and guaranteed credit card acceptance, but also for the peace of mind that the route has been auto-generated to be the fastest and cheapest. And when they do take taxis, they have the most efficient route information available on their smartphone, so cab rip-offs are something of a thing of the past (as long as your battery holds out). In the case of the tourist-trap restaurant, the author notes that the number of outlets has dropped, and the remaining ones have improved, thanks to years of negative reviews on travel review sites.
This is all due to what economists call “information asymmetries”—that is, you’re more likely to spend more than a product is worth if the value of it is complicated or confusing. And when consumers overspend on inferior products, it strains the economy by restraining consumer buying power. If you spend too much money buying your home, you’ll have less leftover to spend on furnishing it or taking vacations to escape it.
One researcher cited in the essay estimates that 25% of American consumer spending goes to products with severe information asymmetry, but that’s a five-point drop from where it was in the year 2000.
In travel, the benefits have been noticeable. We can set fare alerts to find out when a fare we’re watching drops before we buy it. AI can also look at a fare and compare it to historical data to determine how it compares, and also use that data to predict whether it will drop or remain the same. We can also use fare alerts on flights we’ve already purchased, or hire a service to automatically claim the difference if it gets cheaper.
As quickly as travel companies roll out AI to increase their bottom lines, like car rental companies using scanners to find tiny damages, consumers can use it to protect theirs—like using similar software to scan the vehicles themselves at the time of pickup, search for agencies or locations not using the scanner software, or scan the fine print to find loopholes.
Ultimately, businesses profit from opacity, or limiting the amount of information available to consumers. With AI, that calculus changes, meaning consumers pay—on average—a price much closer to the actual value of the product, saving them money and making the economy work better for everybody.