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Worries That AI Self-Driving Cars Will Charge Sky-High Monopolistic Prices

By News Creatives Authors , in Business , at October 12, 2021

I had both Park Place and Boardwalk in my gleeful hands.

Yes, in the venerated game of Monopoly, you can be darned happy when you manage to acquire various keystone properties on the gameboard. By establishing a monopoly in Monopoly, you can take decisive actions that will allow you to charge immense rents. When other players land on your monopoly, or perhaps monopolies if you’ve finagled a bunch of them, you know that those unlucky players will pay through the nose for the privilege of being on your monopolistic property.

That’s just how the game is played.

In the real world, there is also a chance that a marketplace can be dominated in a monopolistic manner.

If that happens, there is a distinct possibility that the monopoly owner or producer will be able to charge sky-high prices for their goods or services. A lack of competition provides an opportunity to attain what is referred to as monopoly rent. Consumers of the desired goods or services will be paying more so than they would otherwise if the monopoly was not a monopoly, thus sometimes our laws seek to break up monopolies and flatten out prices.

It could be that competitors have been unable to readily enter into the particular marketplace and are being shut out in some strident fashion. The monopoly wielder might be able to create barriers that keep competitors at bay. Or perhaps competitors are able to land in the marketplace but the monopolistic player is able to knock them out of ongoing contention.

And so on it goes.

A monopoly that comes into existence can likely glean so-called excess profits. This implies that the pricing of their goods or services is not only high, but it is also presumably sky-high. We would usually expect that purveyors of goods or services ought to be able to achieve a profit of some kind. That’s common sense and the notion behind for-profit entities. The rub comes when it seems like the profits are woefully out of proportion and appear to be gouging those that are buying the goods or services being proffered.

These issues arise especially in the instances of new innovations.

Suppose a pharmaceutical company comes up with a new miracle drug that can cure some terrible ailment. If they are the only provider of this innovative new drug, they can possibly charge sky-high prices for it. Upon any backlash, the reply could be that they invested a tremendous amount into creating the new drug and are simply trying to achieve a profit that will cover those earlier costs. In addition, they would likely argue that without charging those high prices they would not be able to fund their other ongoing development efforts, for which similar miracle drugs might someday be invented.

The same kind of logic applies to technological innovations.

Sometimes a company will invent a new technological piece of wizardry and seek to charge an arm and a leg to those that wish to use or license the shiny item. How much profit should they be able to garner? For some people, the sky is the limit in the sense that to the victor go the spoils. Others though are likely to begrudge the use of outlandish pricing and point out that some could demonstratively benefit from the invention and yet are priced out of the chance of doing so.

Back and forth the pendulum swings. Trying to ferret out what constitutes a monopoly rent can be hard to do. Experts can readily get into heated debates, whereby one expert swears that a monopoly is underway and the prices are outrageously high, while another expert mildly admits that some taint of a monopoly might exist but the pricing is commensurate with the investment and subsistence of the entity involved.

Not going to solve that conundrum here.

The preceding discussion does though bring up the notion that we ought to be keeping our eyes wide open and always on the alert for potential monopolistic practices and situations. One belief is that the sooner such a circumstance is detected, the better off we all are. Perhaps by knowing beforehand that a monopoly is possibly being formulated, it can be headed off at the pass. There might be ways to aid or guide the shaping of the monopoly so that it does not seem quite so onerous, or presumably, stop it before things get out of hand (others would recoil at that idea and would instead fervently clamor that whatever will happen should be allowed to happen).

Where else might a monopoly be just modestly now forming and that we can take a keen look at it in the early stages of growth?

Answer: Self-driving cars.

There is quite a bit of handwringing going on that AI-based true self-driving cars are going to be a monopoly. This is based on the assumption that only a few purveyors will be able to attain true self-driving cars. A tiny set of automakers or self-driving tech firms will hold all the cards when it comes to self-driving cars.

We are not there yet, since the invention of self-driving cars is still being figured out.

But, if you are thinking ahead, those purveyors might be the only entities able to field self-driving cars and therefore be able to charge monopoly rent, as it were. This could include charging sky-high prices for the use of self-driving cars.

Why care about that, you might be wondering?

Some pundits have been advocating that those vaunted self-driving cars will finally allow society to enter into a mobility-for-all era.

Members of society that have been mobility disadvantaged will finally have ready access to the use of cars, namely via self-driving cars. This will happen due to the logic that self-driving cars are going to be a lot less costly to deploy and maintain in comparison to conventional human-driven cars. In short, there is no human driver needed and ergo you’ve excised that cost entirely out of the equation related to the costs for making use of a car.

The thing is, the pricing might not be less than a human-driven car. Even if the costs do drop tremendously, it could be that the small set of purveyors opts to charge sky-high prices for the use of their divined self-driving cars. They could perceive that they are rightfully able to do so. Again, using the earlier indicated argument, the rationale would be that they invested the big dough to get to the point of being able to place self-driving cars into real-world use. They, therefore, need to recoup those sky-high costs, they would vehemently insist.

This brings up another factor about the hopes associated with self-driving cars.

Currently, in the United States, there are about 6.7 million car crashes annually. This produces about 2.5 million injuries and around 40,000 fatalities each year, see my analysis of such stats at the link here. Many of those car crashes are due to human driver foibles, including drunk driving, drowsy driving, distracted driving, and the like. Self-driving cars won’t presumably have those same predilections since there isn’t a human driver at the wheel anymore.

The point being that those revered self-driving cars will essentially make our public roads safer by hopefully reducing the number of car crashes, along with correspondingly reducing the number of said injuries and fatalities thereof. If that is going to be the case, we would all want self-driving cars to as soon as possible be widespread. It stands to reason since our highways and byways will be safer for us all.

In that case, a purveyor of self-driving cars might eloquently argue that even if sky-high prices are being charged, this is pricing that takes into account the societal benefits that accrue from the safer driving aspects. We ought to ergo accept the heightened pricing as part of the strident deal toward saving lives, foregoing injuries, and dramatically lessen the number of car crashes.

That does seem compelling.

A retort to that argument is that the sky-high pricing means that very few will be able to afford the use of self-driving cars. This in turn implies that the number of miles driven via self-driving cars will be minuscule in comparison to the total number of miles of driving (i.e., which includes human-driven cars). Therefore, you won’t get much bang for your buck in the sense that so few miles are being undertaken via self-driving cars that it won’t materially reduce the volume of car crashes.

Self-driving cars would be nothing more than a tiny drop in the tsunami of human driving. You would not reasonably expect that this minuscule usage would move the needle on lowering the number of car crashes. As such, the sky-high pricing is not justifiable as based on the said-to-be hollow argument that lives are going to be saved.

Dizzying!

No matter how you view these matters, it would seem nearly inarguable that the future of cars consists of AI-based true self-driving cars.

To clarify, there isn’t a human driver involved in a true self-driving car. Keep in mind that true self-driving cars are driven via an AI driving system. There isn’t a need for a human driver at the wheel, and nor is there a provision for a human to drive the vehicle. For my extensive and ongoing coverage of Autonomous Vehicles (AVs) and especially self-driving cars, see the link here.

Here’s an intriguing question that is worth pondering: Are we headed toward a potential of monopoly rents as associated with the advent of AI-based true self-driving cars?

Before jumping into the details, I’d like to further clarify what is meant when I refer to true self-driving cars.

Understanding The Levels Of Self-Driving Cars

As a clarification, true self-driving cars are ones that the AI drives the car entirely on its own and there isn’t any human assistance during the driving task.

These driverless vehicles are considered Level 4 and Level 5 (see my explanation at this link here), while a car that requires a human driver to co-share the driving effort is usually considered at Level 2 or Level 3. The cars that co-share the driving task are described as being semi-autonomous, and typically contain a variety of automated add-on’s that are referred to as ADAS (Advanced Driver-Assistance Systems).

There is not yet a true self-driving car at Level 5, which we don’t yet even know if this will be possible to achieve, and nor how long it will take to get there.

Meanwhile, the Level 4 efforts are gradually trying to get some traction by undergoing very narrow and selective public roadway trials, though there is controversy over whether this testing should be allowed per se (we are all life-or-death guinea pigs in an experiment taking place on our highways and byways, some contend, see my coverage at this link here).

Since semi-autonomous cars require a human driver, the adoption of those types of cars won’t be markedly different than driving conventional vehicles, so there’s not much new per se to cover about them on this topic (though, as you’ll see in a moment, the points next made are generally applicable).

For semi-autonomous cars, it is important that the public needs to be forewarned about a disturbing aspect that’s been arising lately, namely that despite those human drivers that keep posting videos of themselves falling asleep at the wheel of a Level 2 or Level 3 car, we all need to avoid being misled into believing that the driver can take away their attention from the driving task while driving a semi-autonomous car.

You are the responsible party for the driving actions of the vehicle, regardless of how much automation might be tossed into a Level 2 or Level 3.

Self-Driving Cars And Monopoly

For Level 4 and Level 5 true self-driving vehicles, there won’t be a human driver involved in the driving task.

All occupants will be passengers.

The AI is doing the driving.

One aspect to immediately discuss entails the fact that the AI involved in today’s AI driving systems is not sentient. In other words, the AI is altogether a collective of computer-based programming and algorithms, and most assuredly not able to reason in the same manner that humans can.

Why this added emphasis about the AI not being sentient?

Because I want to underscore that when discussing the role of the AI driving system, I am not ascribing human qualities to the AI. Please be aware that there is an ongoing and dangerous tendency these days to anthropomorphize AI. In essence, people are assigning human-like sentience to today’s AI, despite the undeniable and inarguable fact that no such AI exists as yet.

With that clarification, you can envision that the AI driving system won’t natively somehow “know” about the facets of driving. Driving and all that it entails will need to be programmed as part of the hardware and software of the self-driving car.

Let’s dive into the myriad of aspects that come to play on this topic.

One of the most forgotten factors when it comes to thinking about the advent of self-driving cars is something known as human-driven cars. I say that somewhat facetiously, but with a notable point in hand.

Much of the painted picture of the future envisions self-driving cars roaming across our many streets, freeways, and public roadways. Indeed, the only thing that you seem to see in these visionary portrayals is self-driving cars.

Where did the human-driven cars go?

I ask this question because the answer is relatively straightforward. Human-driven cars are not going anywhere, at least not in any near-term or medium-term timeframe.

You cannot just wish away human-driven cars. In the United States, there are approximately 250 million conventional human-driven cars. Even if self-driving cars become feasible and practical tomorrow, it would take many years, likely decades, before there would be a substantive proportion of self-driving cars in comparison to human-driven cars. Nobody realistically is going to junk human-driven cars due to the emergence of self-driving cars.

Some believe we might have to legislate the demise of human-driven cars. It could be that laws are enacted that put an expiration date on all human-driven cars. Perhaps that might come to pass, but I seriously doubt it, and certainly not in any near-term perspective. Many people insist that you will take away their driving only when you’ve pried their dead cold hands from their steering wheel.

A kind of utopia that has exclusively self-driving cars is not at all realistic in today’s world. A long, long time from now, perhaps that will emerge as a societal norm. Not now. Not soon. Sure, there might be narrow settings that this happens, such as a city that puts its foot down and declares that only self-driving cars can enter into the downtown areas. That might happen. This though has little to do with the notion that the proportion of self-driving cars will magically outnumber the volume of human-driven cars all told.

I trust that you are perhaps persuaded that we will have both self-driving cars and human-driven cars, co-existing on our public roadways for quite a while into the future.

Why have I dragged you through that seemingly now obvious point?

Because of the matter entailing competition.

Those that are decrying the possibility of purveyors of self-driving cars being monopolistic are forgetting or overlooking the dominance of human-driven cars.

Look at it this way.

You are trying to decide whether to use a self-driving car to get to your local grocery for a shopping trip or whether you might use a human-driven car.

Assume that both are readily available.

Go along with the overall notion that self-driving cars are known for being somewhat safer as a driver than the average human-driven car. But this is a relatively short driving journey and you perceive that the risk-safety factor involved is a negligible difference in this brief trip.

Both options will take you door-to-door. This means that the self-driving car will pick you up at your house and take you directly to the grocery store. Likewise, a human-driven car would do the same. We will assume that this is all taking place on ridesharing or ride-hailing basis.

There is a kind of novelty associated with taking the self-driving car. On the other hand, you’ve used a self-driving car for some previous rides and you now realize that there is nothing special about doing so. For my explanation about what it is like to go for a ride in a self-driving car, see the link here.

The thrill has worn off. At this juncture, you assess the self-driving car option as simply an alternative form of transit, nothing especially remarkable otherwise.

Okay, now we make use of the monopoly rents scenario.

Turns out that the price to use a human-driven car is vastly less than using a self-driving car. This is because the self-driving car purveyors are charging sky-high prices.

Which do you choose, the lower costing human-driven car or the sky-high-priced self-driving car?

Assuming that you are no longer enamored with the aura of using a self-driving car, and all else being rather equal, it would seem that you are bound to choose the human-driven car.

In that manner, there is competition facing those self-driving cars.

Whether the purveyors of those self-driving cars will be able to keep those sky-high prices in place is an open question. If they are getting only minimal use out of their self-driving cars, it would seem that they would need to take some kind of action to overcome the marketplace reticence. There are several ploys they could try. One would be to bring their prices down.

Conclusion

It seems that the odds of having a sustainable monopolistic rent in the case of self-driving cars will be a bit unlikely due to the competition fostered by human-driven cars. Human-driven cars are available aplenty. They aren’t going to be whisked away overnight.

This doesn’t though mean that the purveyors of self-driving cars will have to set their prices on a less than sky-high basis. Not at all.

They could go ahead and use sky-high prices. The implication is that consumers would on the balance be more likely to choose a human-driven car versus using those self-driving cars. Nonetheless, there would be some that would opt to use self-driving cars and pay the premium price to do so.

This then brings us into some dicey territory for those purveyors of self-driving cars that set their prices sky-high. I’ve previously pointed out that there are some worries that self-driving cars will only be ridden by the wealthy and the famous, for which a societal backlash could develop (see my analysis at this link here).

You can easily imagine the kind of stink that this would create for those purveyors that are charging sky-high prices for the use of their self-driving cars. Lawmakers and others that are hoping for the mobility-for-all era to emerge would be shocked and dismayed at the pricing tomfoolery (so it would seem).

Fortuitously, there would appear to be many crucial factors that would tend to inhibit the sky-high pricing, or at least create pressures to get the pricing to come down.

Here’s an added twist for you.

You might be surprised to know that many of the self-driving car makers are in fact worried about the general acceptance regarding the use of self-driving cars. If self-driving cars out-the-gate get a bad rap, perhaps due to being exorbitantly priced, this could squelch the whole deal. All that investment in the creation of a self-driving car could become a heavy anchor that cannot be recouped.

Going with a sky-high price might seem like an initial wise choice, and the novelty factor will potentially sustain that pricing for a while, but the long run of things will undoubtedly cast doubt on such a pricing strategy.

Oddly enough, things might go in the opposite direction. It could be that self-driving cars are priced at extraordinarily low rates, much lower than the comparable pricing for a human-driven car. In that case, there is a likely attack that this is some form of predatory pricing, trying to put human drivers out of existence.

Well, by gosh, that is pretty much kind of the general idea overall.

We are bound to see quite a hefty discussion about that concern, perhaps more so than the qualms about monopolistic rents. Getting humans out from behind the steering wheel does have merits, as mentioned previously about the challenges associated with human-led car crashes.

How will society adjust when all of those human drivers that rely upon driving as a source of income and for making a living are dealt a blow by the advent of self-driving cars?

The good news, if that’s what we can call it, will be that this is going to happen gradually and over a lengthy period of time. Rather than waking up one morning and all that you see are a plethora of self-driving cars driving on your streets, you will instead see a mixture of self-driving cars and human-driven cars for a long time to come.

At first, it will be very few self-driving cars and a lot of everyday human-driven cars. When that proportion inevitably shifts, taking place seemingly at a glacial pace, we will have step by step morphed into a world of self-driving cars. Keep your eyes open and make sure to pay attention during this coming rugged road toward the advent of self-driving cars.

And keep looking out your window to see how things are looking, and always remember, do not pass go (or, maybe that should be to always pass go).

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