Bargaining with Algorithms: An Experiment on Algorithmic Price Discrimination and Consumer and Data Protection Laws

Date: October 13, 2025 (Monday)
Time: 9am – 10am
Venue: Room 723, 7/F Cheng Yu Tung Tower, The University of Hong Kong

Speaker: Haggai Porat (Law and Economics Fellow, New York University School of Law)

Using algorithms to personalize prices is no longer a fringe phenomenon but, rather, the predominant business practice in many online markets. Seemingly unrelated, consumer protection laws have been grounded on the premise that consumers lack meaningful power to bargain over contract terms. This paper suggests that the increasing use of algorithms to set personalized prices based on consumers’ behavior opens a path for consumers to “bargain” with algorithms over prices and reclaim market power. Moreover, this interaction between consumers and sellers should inform the evolving regulation of pricing algorithms. Accordingly, this paper presents the results of a pre-registered, incentive-compatible randomized online experiment that tested whether and how consumers bargain with algorithms. In multiple rounds, participants were offered a $10 gift card at a price set by an algorithm based on participants’ purchase decisions in preceding rounds. The study explored the potential for regulating algorithmic pricing with standard tools from consumer and data protection laws: a disclosure mandate, the right to prevent data collection ex-ante (“cookies laws”), and the right to prevent data retention ex-post (“erasure laws” or the “right to be forgotten”). We found clear evidence that participants strategically avoided purchases they would have otherwise made to induce a price decrease in subsequent rounds, albeit not to the extent predicted by a rational choice model. We found that this strategic behavior increased in magnitude and statistical significance in the presence of disclosure. We further found clear evidence that participants who were granted data protection rights used them strategically: preventing retention or collection of their data in rounds in which they purchased the gift card so as to prevent a subsequent price increase and allowing it in rounds in which they declined to purchase so as to signal a low WTP and benefit from a price decrease in the next round.

Haggai Porat is a post-doctoral fellow at the NYU Law & Economics Center, as well as an Olin Fellow and SJD Candidate at Harvard Law School, and a PhD candidate at the Tel Aviv School of Economics. His primary research focus is on consumer behavior and consumer contracts law in online algorithmic markets. His additional research interests include litigation and settlement, judicial decisionmaking, and discrimination.

Moderator: Benjamin Chen, Associate Professor & Director of the Law and Technology Centre, The University of Hong Kong Faculty of Law

To register, please go to https://hkuems1.hku.hk/hkuems/ec_regform.aspx?guest=Y&UEID=102886. A paper will be circulated in advance and attendees will be expected to have read the paper before the seminar.

We are applying for a CPD point with the Law Society of Hong Kong.