AI and Algorithms Drive Personalized Pricing and Targeted Advertising in Fast Food and Gambling

In the fast-food industry, McDonald's is reportedly using an AI-driven "pricing engine" in several markets, including the United States. The system uses machine learning algorithms to analyze millions of daily transactions across approximately 14,000 stores to calculate "optimal prices" based on regional customer willingness to pay and competitor pricing from chains like Burger King and Wendy's. While McDonald's states that final pricing decisions remain with franchise owners, owners have testified that they face significant pressure from headquarters to adopt the system's recommended prices.

In the online grocery sector, research by Groundwork Collaborative, Consumer Reports, and More Perfect Union found evidence of pricing experimentation on Instacart. A study involving 437 shoppers found that Instacart quoted prices to some consumers that were up to 23% higher than those quoted to others for the exact same grocery item at the same time and location. Instacart responded that while some customers may see slight variations, most see standard prices, asserting that fluctuations are randomized and do not use specific customer characteristics.

In the gambling sector, DraftKings has been reported to use a machine learning model to target individuals most likely to lose. According to a former data analyst at the company, the model was designed in 2023 to detect users who respond to advertisements by betting more and losing more. While DraftKings has denied claims of unfair targeting, stating that promotions target active users rather than loss amounts, investigations have highlighted concerns regarding the targeting of individuals prone to gambling addiction.