Human-Machine Interactions in Pricing: Evidence from Two Large-Scale Field Experiments

34 Pages Posted: 12 Apr 2024

See all articles by Tobias Huelden

Tobias Huelden

Zalando SE

Vitalijs Jascisens

Zalando SE

Lars Roemheld

Zalando SE

Tobias Werner

Center for Humans and Machines / Max Planck Institute for Human Development; Heinrich Heine University Dusseldorf - Duesseldorf Institute for Competition Economics (DICE)

Date Written: March 18, 2024

Abstract

While many companies use algorithms to optimize their pricing, additional human oversight and price interventions are widespread. Human intervention can correct algorithmic flaws and introduce private information into the pricing process, but it may also be based on less sophisticated pricing strategies or suffer from behavioral biases. Using fine-grained data from one of Europe's largest e-commerce companies, we examine the impact of human intervention on the company's commercial performance in two field experiments with around 700,000 products. We show that sizeable heterogeneity exists and present evidence of interventions that harmed commercial performance and interventions that improved firm outcomes. We show that the quality of human interventions can be predicted with algorithmic tools, which allows us to exploit expert knowledge while blocking inefficient interventions.

Keywords: Artificial Intelligence, Human-Computer-Interaction, Uniform pricing

JEL Classification: C93, D22, L2, L81

Suggested Citation

Huelden, Tobias and Jascisens, Vitalijs and Roemheld, Lars and Werner, Tobias, Human-Machine Interactions in Pricing: Evidence from Two Large-Scale Field Experiments (March 18, 2024). Available at SSRN: https://ssrn.com/abstract=4763132 or http://dx.doi.org/10.2139/ssrn.4763132

Tobias Huelden

Zalando SE ( email )

Vitalijs Jascisens

Zalando SE ( email )

Lars Roemheld

Zalando SE ( email )

Tobias Werner (Contact Author)

Center for Humans and Machines / Max Planck Institute for Human Development ( email )

Berlin
Germany

Heinrich Heine University Dusseldorf - Duesseldorf Institute for Competition Economics (DICE) ( email )

Universitaetsstr. 1
Duesseldorf, NRW 40225
Germany

HOME PAGE: http://tfwerner.com

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