What Is Personalized Pricing—and Why Are Lawmakers Scrambling to Ban It?

Companies already track your every move online. Some researchers say it is only a matter of time until retailers start using that data to set prices just for you.

By Jackie Snow of The WSJ.

The print edition titled this article "How to Prevent Personalized Pricing." This sounds like a form of price discrimination, which I will explain a bit after excerpts. This is not necessarily a bad thing. I will get into that later as well. And as the article mentions, sometimes this personal pricing can get you a lower price (see some text highlighted in red).

Excerpts:

"what if the price you get is set for you alone—a measure of what the retailer thinks you’ll pay based on the data it has about you"

"Dynamic pricing, where the same fare or rate shifts for everyone based on supply and demand, also has become common across industries, including airfares and ride-shares."

"retailers could use personal data to set a higher base price for individual consumers, without their knowledge, when algorithms detect things like urgent need (like business travelers who need to fly somewhere right away as I explain below) or high disposable income." 

"companies now have access to much more detailed profiles of customers based on information drawn from across the Web, and pricing algorithms make it easier to adjust prices for individuals based on that data."

"In early 2025, the Federal Trade Commission . . . determined that companies were selling pricing and consumer-data tools to help retailers across various industries set individualized prices"

"Pricing based on ZIP Code, for instance, often correlates with race. What’s more, there are increased privacy and cybersecurity risks when businesses share a lot of customer data drawn from various sources across companies and platforms."

"Maryland in April became the first state to ban food retailers and delivery services from using personal data to set higher prices.

In New York, a law took effect in November 2025 requiring companies to disclose when they use personal data to set prices. State legislators are now pushing to go further, introducing two new bills that would ban the practice outright while preserving loyalty programs and coupons, as well as discounts for veterans and seniors."

"experts suggest a few steps worth trying, especially for big purchases.

—Compare prices across devices or browsers before committing. The differences may be small but it takes minutes and is worth the check.

Use incognito or private browsing mode, which prevents cookies from persisting between sessions and makes it harder for sites to recognize you as a returning visitor"

"Use aggregator sites like Google Flights or Kayak before going directly to a company’s own platform. Searching through an aggregator avoids triggering demand signals on a single site"

"personalized pricing cuts both ways. The same tools that can be used to charge you more when you seem desperate also can be used to offer you a discount when you seem hesitant. 

"If it knows you are a price-sensitive (meaning more elastic demand than average) shopper who compares across sites, it may offer you a better deal" 

Price discrimination is when a business charges different prices to different consumers who have different elasticities of demand (or responsiveness to price changes). If you spend a small share of your income on a good, your demand will be inelastic and if price goes up, quantity demanded will not fall very much.

If you have a short time horizon, like a business traveler, your demand is inelastic and you will get charged a higher price. 

Investopedia has a good article on Price discrimination by Melissa Horton. There are three degrees of price discrimination. This personalized pricing is an example of the first degree case. It says

"this strategy occurs when businesses can accurately determine what each customer will pay for a specific product or service and then sell it for that price." 

Price discrimination is not necessarily a bad thing. Firms that use it increase profits. I show this with a graphical and mathematical example at an earlier post of mine called FTC to Examine if Companies Raise Prices Using Consumer Surveillance. This also shows that quantity is higher when the firm price discriminates, which gets mentioned below as welfare enhancing. Customers with low elasticity will tend to get higher prices than those with high elasticity. My example has two graphs with demand lines that each have a different elasticity of demand.

Here are some examples of how price discrimination can be good:

See A Love Letter to Tyler Cowen by David Henderson. 

"The web has also, notes [Tyler] Cowen, facilitated price discrimination, which typically gives low prices to people with low time values. Since time values and income are highly positively correlated, price discrimination “is usually an egalitarian development.”"  

This happens when leisure travelers have more time to shop around than business travelers, so they have a higher elasticity of demand and they get a lower price. A business traveler who is told by their boss to fly to another city tomorrow does not have much time to shop around. So the airlines know that anyone who is wanting a ticket for flight tomorrow has low elasticity and will get a higher price. 

Also see Price Discrimination by Tejvan Pettinger. A key passage is:

"Price discrimination will enable some firms to stay in business who otherwise would have made a loss. For example price discrimination is important for train companies who offer different prices for peak and off-peak. Without price discrimination, they may go out of business or be unable to provide off-peak services."

Then see See Progressive taxation as price discimination.Tyler Cowen said:

"The point of price discrimination is to sell more goods and services while taking in more profit; the low demanders can pay a lower price, yet the company still sells for a higher price to the high demanders.  If output goes up, social welfare usually does too."