What possibly makes you think that prices will plummet instead of corporations just taking more profits and the gains all going to shareholders?
Why do prices ever drop?
Seems the price of computing has plummeted dramatically over the years…and after the breakup of AT&T and the ensuing competition and tech advancements, phone communications are far cheaper now than before.
To generate the computing power of a modern, $1000 iPhone in 1960 might cost hundreds of billions of dollars, take up as much space as the Pentagon, and use as much electricity as a small city did then.
Also, consider that when America was founded, the average family spent up to 75% of their income on food! Advances in agriculture and the Industrial Revolution blew that paradigm out of the water.
So competition and new, more productive technology are key here: Let’s say a business exists in a simple 5 company industry in which each player holds an equal share of the market. If company #1 can use AI to reduce their cost of production significantly they can maximize the value of their company by gaining market share with as small a reduction in pricing as possible. If the AI solution is figured out by the other 4 companies, pricing will reset at a much lower level.
Similarly, just look at the price drops in drugs when their patents expired. Prozac and Lipitor prices dropped more than 90% when multiple generics hit the market.
So yeah, prices drop…
…per ChatGPT
Has AI yet been responsible for a decline in prices of any products?AI has already contributed to price declines in several industries and products by improving efficiency, reducing production costs, and enhancing supply chain management. One notable area is consumer electronics and hardware, where AI-powered automation and robotics have reduced labor costs and increased manufacturing efficiency. This has helped stabilize or lower the prices of products such as smartphones and laptops, even as they have grown more complex. Additionally, e-commerce platforms utilize AI-driven dynamic pricing, which adjusts prices based on demand and competition, often leading to discounts for consumers.
In renewable energy, AI has played a role in the significant price drop of solar panels and lithium-ion batteries by optimizing manufacturing processes and streamlining supply chain logistics. Furthermore, AI’s applications in energy management have reduced electricity costs for consumers who rely on renewable energy sources. Similarly, cloud computing services have benefited from AI-driven improvements in server utilization and cooling systems. These advancements have allowed providers like AWS, Google Cloud, and Microsoft Azure to offer more competitive pricing for storage and computing power.
AI’s impact extends to food delivery and grocery industries, where it optimizes supply chains and delivery routes. Companies like Walmart and Instacart use AI to minimize waste and improve efficiency, which sometimes translates into lower prices for consumers. By managing perishable goods more effectively, AI also reduces spoilage and markdowns, further cutting costs.
The field of online education has seen lower costs as AI automates content creation and personalizes learning paths. These innovations have reduced the expense of developing and delivering digital courses, making e-learning more affordable. Similarly, in transportation, ridesharing companies such as Uber and Lyft use AI for route optimization and surge pricing, which can result in lower fares during off-peak hours. AI has also contributed to the declining prices of electric vehicles by driving advancements in battery technology and manufacturing.
Pharmaceuticals have also felt the impact of AI, particularly in drug discovery. By streamlining research and clinical trials, AI has reduced the cost and time required to develop new medications, potentially lowering the price of certain drugs.
Overall, AI’s influence on pricing is most evident in industries where it increases efficiency, reduces waste, and automates processes. Although its effect is not uniform across all sectors, its growing role in technology, energy, and logistics-intensive industries is making many products and services more affordable.