Price of Intelligence: How Should Socially-minded Firms Price and Deploy AI?

IMF Working Papers, November 7, 2025

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Title: "Price of Intelligence: How Should Socially-minded Firms Price and Deploy AI?"
Authors: Nils H. Lehr, Pascual Restrepo
Publication date: November 7, 2025
Type: IMF Working Paper (Working Paper No. 2025/234, Issue: 234)
Core question: How should firms with a social mandate price and deploy AI when they claim to prioritize social welfare?

Derive pricing formulas that depart from profit maximization by incorporating incentives to:
- improve welfare;
- reduce labor disruptions.
Empirical evaluation uses US data to assess several scenarios.

Welfarist firm scenario:
- A welfarist firm that values both profit and welfare should price closer to marginal cost, as efficiency gains outweigh distributional concerns.
Conservative firm scenario:
- A conservative firm focused on labor-market stability should price above the profit-maximizing level in the short run, especially when its AI may displace low-income workers.
Trade-off emphasized:
- Socially minded firms face a trade-off between expanding access to AI and the resulting loss in profits and labor market risks.

Pricing decisions by socially minded AI firms affect both efficiency and distributional outcomes.
Firms with explicit welfare objectives may lower prices toward marginal cost to maximize aggregate welfare.
Firms prioritizing labor-market stability may accept higher prices in the short run to mitigate displacement of low-income workers.
The balance between expanding AI access and limiting labor-market risks is central to firm strategy and public policy interactions.