Bullish predictions suggest that artificial intelligence (AI) could contribute up to $15.7 trillion to the global economy by 2030. From autonomous cars to faster mortgage approvals and automated advertising decisions, AI algorithms promise numerous benefits for businesses and their customers. Unfortunately, these benefits may not be enjoyed equally. Algorithmic bias -- when algorithms produce discriminatory outcomes against certain categories of individuals, typically minorities and women -- may also worsen existing social inequalities, particularly when it comes to race and gender. From the recidivism prediction algorithm used in courts to the medical care prediction algorithm used by hospitals, studies have found evidence of algorithmic biases that make racial disparities worse for those impacted, not better. Many firms have put considerable effort into combating algorithmic bias in their management and services.

White people who host rental properties on Airbnb earn significantly more per year than Black hosts, but a "race blind" pricing algorithm could help close that income gap, new research shows. Black hosts who rely on Airbnb's algorithm to set enticing prices instead of manually choosing rates increase their occupancy rates significantly, bringing their earnings more in line with the higher rental incomes of white hosts, according to a study coauthored by Shunyuan Zhang, an assistant professor in the Marketing Unit at Harvard Business School. Zhang's findings come at a critical time for the travel industry. People eager to shake off their COVID-19 cabin fever are gearing up to take vacations, raising Airbnb bookings by 52 percent last quarter from a year earlier. Harnessing artificial intelligence to reduce racial economic disparities might help more property owners benefit from pent-up lodging demand.

Machine learning algorithms can leverage vast amounts of consumer data, allowing automation of business decisions such as pricing, product offerings, and promotions. Airbnb, an online marketplace for vacation rentals and other lodging, created an algorithm-based smart-pricing tool that is free to all Airbnb hosts and allows hosts to set their properties' daily price automatically. A new study investigated the impact of Airbnb's algorithm on racial disparities among Airbnb hosts. Adopting the tool narrowed the revenue gap between white and Black hosts considerably, but because far fewer Black hosts used the algorithm, the revenue gap between white and Black hosts actually increased after the tool's introduction. The study, by researchers at Carnegie Mellon University (CMU), is forthcoming in Marketing Science.