Dynamic pricing: Difference between revisions
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In 2016, a behavioral scientist that works at Uber made clear that the company could prove that people that people are willing to pay more when their phone batteries were low. Uber claimed they “absolutely don’t use that” information, but | In 2016, a behavioral scientist that works at Uber made clear that the company could prove that people that people are willing to pay more when their phone batteries were low. Uber claimed they “absolutely don’t use that” information, but it's not legally prohibited, so consumers have to take their word for it.<ref>{{Cite web |last=Mahdawi |first=Arwa |date=13 Apr 2018 |title=Is your friend getting a cheaper Uber fare than you are? |url=https://www.theguardian.com/commentisfree/2018/apr/13/uber-lyft-prices-personalized-data |url-status=live |archive-url=https://web.archive.org/web/20260312173357/https://www.theguardian.com/commentisfree/2018/apr/13/uber-lyft-prices-personalized-data |archive-date=12 Mar 2026 |access-date=26 Mar 2026 |website=The Guardian}}</ref><ref name=":2" /> Price discrimination concerns have also been publicly remediated by claiming the usage of a practice known as "[[steering]]" instead. Steering is dynamically showing more expensive ''options'' based on individual consumer's characteristics, such as being a Mac user.<ref>{{Cite web |last=Kingsley-Hughes |first=Adrian |date=27 Jun 2012 |title=Mac Users Have Money to Spare, Says Orbitz |url=https://www.forbes.com/sites/adriankingsleyhughes/2012/06/26/mac-users-have-money-to-spare-says-orbitz/ |url-status=live |archive-url=https://web.archive.org/web/20250603093545/https://www.forbes.com/sites/adriankingsleyhughes/2012/06/26/mac-users-have-money-to-spare-says-orbitz/ |archive-date=3 Jun 2025 |access-date=26 Mar 2026 |website=Forbes}}</ref> | ||
Not being able to objectively compare prices restricts a consumer's ability to perceive fair pricing. The ability to plan future purchases is also limited, because prices change constantly. From a consumer perspective, the unfavorable aspects algorithmic pricing can outweigh the ability to search and compare online that enables more choices.<ref name=":0" /> | Not being able to objectively compare prices restricts a consumer's ability to perceive fair pricing. The ability to plan future purchases is also limited, because prices change constantly. From a consumer perspective, the unfavorable aspects algorithmic pricing can outweigh the ability to search and compare online that enables more choices.<ref name=":0" /> | ||
Revision as of 15:05, 28 March 2026
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Dynamic pricing is an umbrella term, which refers to a pricing strategy of modifying the price of a product or service according to market demands and/or consumer-identifying information. This definition includes surge pricing, surveillance pricing, demand pricing, time-based pricing and variable pricing.
How it works
Dynamic pricing involves setting individual-consumer prices and dynamically changing them both over time and personally depending on individual consumer information, all of which is done by algorithms.[1][2] To make it more effective, the customer is given real-time content recommendation based on their history of personal information. The algorithms can also detect if a customer is disengaging, which then causes dynamic pricing and communications to intervene.[3]
Why it is a problem
Price discrimination
Price discrimination is illegal in the U.S. if it is based on race, gender, religion, or nationality, but doesn't prohibit price discrimination based other personal factors.[4] Companies aren't upfront about using other personal factors, because consumers don't like it when they find out they were charged more for the same products than the people around them.[5][6][7]
Perceived fairness
In 2016, a behavioral scientist that works at Uber made clear that the company could prove that people that people are willing to pay more when their phone batteries were low. Uber claimed they “absolutely don’t use that” information, but it's not legally prohibited, so consumers have to take their word for it.[8][4] Price discrimination concerns have also been publicly remediated by claiming the usage of a practice known as "steering" instead. Steering is dynamically showing more expensive options based on individual consumer's characteristics, such as being a Mac user.[9]
Not being able to objectively compare prices restricts a consumer's ability to perceive fair pricing. The ability to plan future purchases is also limited, because prices change constantly. From a consumer perspective, the unfavorable aspects algorithmic pricing can outweigh the ability to search and compare online that enables more choices.[1]
Privacy concerns in digital marketing
Dynamic pricing involves highly personal and identifying consumer data for individual price determination, which raises serious concerns about privacy.[1][2] There is a lack of transparency around that data collection, because often the consumer is not informed that:
- The sites they have previously visited in their browser and their clicks are tracked to finely infer tastes, income and health status.
- Merchants don't have to ask explicit consent to adjust prices based on tracking cookies.
This is an informational advantage that companies leverage, which could limit the consumer's ability to objectively compare products online.[10]
Examples
References
- ↑ 1.0 1.1 1.2 Seele, Peter; Dierksmeier, Clause; Hofstetter, Reto; Schultz, Mario D. (10 December 2019). "Mapping the Ethicality of Algorithmic Pricing: A Review of Dynamic and Personalized Pricing". Journal of Business Ethics. 170 – via Springer.
- ↑ 2.0 2.1 Priester, Anna; Robbert, Thomas; Roth, Stefan (23 January 2020). "A special price just for you: effects of personalized dynamic pricing on consumer fairness perceptions". Journal of Revenue and Pricing Management. 19 – via Springer.
- ↑ Dakouan, Chouaib; Benabdelouahed, Redouane; Lebbar, Oumaima (11 March 2026). "Theoretical Exploration of the Application of Artificial Intelligence in Optimizing Inbound Marketing Practices". Strategic Innovative Marketing and Tourism: 4, 5 – via Springer.
- ↑ 4.0 4.1 "Is Dynamic Pricing Legal?". FindLaw. 25 Mar 2026. Retrieved 25 Mar 2026.
{{cite web}}: CS1 maint: url-status (link) - ↑ Giansiracusa, Noah (26 Dec 2025). "Algorithmic pricing is scary. It doesn't have to be". The Boston Globe. Archived from the original on 27 Dec 2025. Retrieved 26 Mar 2026.
- ↑ Vedantam, Shankar (17 May 2016). "This Is Your Brain On Uber". NPR. Archived from the original on 8 Sep 2025. Retrieved 26 Mar 2026.
- ↑ Chen, M. Keith; Sheldon, Michael (November 3, 2025). "Dynamic Pricing in a Labor Market: Surge Pricing and the Supply of Uber Driver-Partners". Labor Studies. Archived from the original on 1 Mar 2026 – via Google Scholar.
- ↑ Mahdawi, Arwa (13 Apr 2018). "Is your friend getting a cheaper Uber fare than you are?". The Guardian. Archived from the original on 12 Mar 2026. Retrieved 26 Mar 2026.
- ↑ Kingsley-Hughes, Adrian (27 Jun 2012). "Mac Users Have Money to Spare, Says Orbitz". Forbes. Archived from the original on 3 Jun 2025. Retrieved 26 Mar 2026.
- ↑ Egan, Shannon (5 Apr 2021). "Mapping the Ethicality of Algorithmic Pricing".
- ↑ Hernandez, Joe (2024-02-28). "No, Wendy's says it isn't planning to introduce surge pricing". NPR.