EconPapers    
Economics at your fingertips  
 

Balancing Profit and Fairness in Risk-Based Pricing Markets

Jesse Thibodeau, Hadi Nekoei, Afaf Ta\"ik, Janarthanan Rajendran and Golnoosh Farnadi

Papers from arXiv.org

Abstract: Dynamic, risk-based pricing can systematically exclude vulnerable consumer groups from essential resources such as health insurance and consumer credit. We show that a regulator can realign private incentives with social objectives through a learned, interpretable tax schedule. First, we provide a formal proposition that bounding each firm's \emph{local} demographic gap implicitly bounds the \emph{global} opt-out disparity, motivating firm-level penalties. Building on this insight we introduce \texttt{MarketSim} -- an open-source, scalable simulator of heterogeneous consumers and profit-maximizing firms -- and train a reinforcement learning (RL) social planner (SP) that selects a bracketed fairness-tax while remaining close to a simple linear prior via an $\mathcal{L}_1$ regularizer. The learned policy is thus both transparent and easily interpretable. In two empirically calibrated markets, i.e., U.S. health-insurance and consumer-credit, our planner simultaneously raises demand-fairness by up to $16\%$ relative to unregulated Free Market while outperforming a fixed linear schedule in terms of social welfare without explicit coordination. These results illustrate how AI-assisted regulation can convert a competitive social dilemma into a win-win equilibrium, providing a principled and practical framework for fairness-aware market oversight.

Date: 2025-05, Revised 2025-06
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/2506.00140 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2506.00140

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().

 
Page updated 2025-07-26
Handle: RePEc:arx:papers:2506.00140