FROM AUTONOMOUS CARS to faster mortgage approvals and automated advertising decisions, AI algorithms promise numerous benefits for businesses and customers alike. Machine learning (ML) algorithms can use vast amounts of consumer data and automate key business decisions such as pricing, product offerings and promotions in real time and at micro-targeted levels.
Unfortunately, these benefits may not be enjoyed equally. Algorithmic bias — which occurs when algorithms produce discriminatory outcomes against certain categories of individuals — typically minorities and women — may also worsen existing social inequities, particularly when it comes to race and gender. From the recidivism prediction algorithm used in courts to medical care prediction algorithms used by hospitals, studies have found evidence of algorithmic biases that make racial disparities worse for those impacted, not better.
Large e-tailers such as and travel websites were early adopters of pricing algorithms, and these tools are now becoming more ubiquitous. For example, created a smart-pricing tool based on a ML algorithm and offered it for free to all of its hosts. When a host turns on the algorithm, it automatically adjusts the property’s nightly rate to optimize revenue based on an evaluation of a rich set of factors — such as the property’s characteristics and seasonality —
