Dynamic pricing: Difference between revisions

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'''Dynamic pricing''', ~~also known as~~ '''surge pricing''', '''surveillance pricing''', '''demand pricing''', '''time-based''' pricing and '''variable pricing''' ~~is a pricing strategy that consist of modifying the price of a product or service according to market demands~~.

'''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.<ref name=":0">{{Cite journal |last=Seele |first=Peter |last2=Dierksmeier |first2=Clause |last3=Hofstetter |first3=Reto |last4=Schultz |first4=Mario D. |date=10 December 2019 |title=Mapping the Ethicality of Algorithmic Pricing: A Review of Dynamic and Personalized Pricing |url=https://link.springer.com/article/10.1007/s10551-019-04371-w |journal=Journal of Business Ethics |volume=170 |via=Springer}}</ref><ref name=":1">{{Cite journal |last=Priester |first=Anna |last2=Robbert |first2=Thomas |last3=Roth |first3=Stefan |date=23 January 2020 |title=A special price just for you: effects of personalized dynamic pricing on consumer fairness perceptions |url=https://link.springer.com/article/10.1057/s41272-019-00224-3 |journal=Journal of Revenue and Pricing Management |volume=19 |via=Springer}}</ref> 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.<ref>{{Cite journal |last=Dakouan |first=Chouaib |last2=Benabdelouahed |first2=Redouane |last3=Lebbar |first3=Oumaima |date=11 March 2026 |title=Theoretical Exploration of the Application of Artificial Intelligence in Optimizing Inbound Marketing Practices |url=https://link.springer.com/chapter/10.1007/978-3-032-12968-0_1#DOI |journal=Strategic Innovative Marketing and Tourism |pages=4, 5 |via=Springer}}</ref>

==Why it is a problem==

===Price discrimination===

According to U.S. law, "Price discrimination is illegal if it is based on impermissible factors like race, gender, religion, or nationality. So stores can't charge men and women different prices for the same product."<ref>{{Cite web |date=25 Mar 2026 |title=Is Dynamic Pricing Legal? |url=https://www.findlaw.com/legalblogs/small-business/is-dynamic-pricing-legal/ |url-status=live |access-date=25 Mar 2026 |website=FindLaw}}</ref>

===Privacy concerns in digital marketing===

Dynamic pricing involves highly personal and identifying consumer data for individual price determination, which raises serious concerns about privacy.<ref name=":0" /><ref name=":1" /> The problem stems from the collection of fine-grained consumer behavior data, as well as the lack of transparency around that data collection. The driving force for algorithmic pricing models, especially personalized pricing, is tracking cookies. This data, which includes browsing activity such as clicks, and past page visits, as well as personal information entered on the site, can be used to finely infer the tastes, income, health etc. of the individual.

Many consumers are unaware that this information is even being collected, and merchants do not have to ask explicit consent to use tracking cookies for pricing purposes. The onus is left to the consumer to protect themselves if they do not want to be targeted for personalized marketing. This data collection creates a massive informational advantage for companies, which may offset the price advantage that a consumer can gain due to the ease of searching online. It also limits a consumer’s ability to plan future purchases, as prices constantly fluctuate. These ethically “bad” features of algorithmic pricing may limit the economic freedom of the consumer, even if the moral “goods” tend to enable more choices.<ref>{{Cite web |last=Egan |first=Shannon |date=5 Apr 2021 |title=Mapping the Ethicality of Algorithmic Pricing |url=https://montrealethics.ai/mapping-the-ethicality-of-algorithmic-pricing/}}</ref>

==Examples==

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 {{Stub}}
-'''Dynamic pricing''', also known as '''surge pricing''', '''surveillance pricing''', '''demand pricing''', '''time-based''' pricing and '''variable pricing''' is a pricing strategy that consist of modifying the price of a product or service according to market demands.
+'''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==
-{{Ph-T-HIW}}
+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.<ref name=":0">{{Cite journal |last=Seele |first=Peter |last2=Dierksmeier |first2=Clause |last3=Hofstetter |first3=Reto |last4=Schultz |first4=Mario D. |date=10 December 2019 |title=Mapping the Ethicality of Algorithmic Pricing: A Review of Dynamic and Personalized Pricing |url=https://link.springer.com/article/10.1007/s10551-019-04371-w |journal=Journal of Business Ethics |volume=170 |via=Springer}}</ref><ref name=":1">{{Cite journal |last=Priester |first=Anna |last2=Robbert |first2=Thomas |last3=Roth |first3=Stefan |date=23 January 2020 |title=A special price just for you: effects of personalized dynamic pricing on consumer fairness perceptions |url=https://link.springer.com/article/10.1057/s41272-019-00224-3 |journal=Journal of Revenue and Pricing Management |volume=19 |via=Springer}}</ref> 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.<ref>{{Cite journal |last=Dakouan |first=Chouaib |last2=Benabdelouahed |first2=Redouane |last3=Lebbar |first3=Oumaima |date=11 March 2026 |title=Theoretical Exploration of the Application of Artificial Intelligence in Optimizing Inbound Marketing Practices |url=https://link.springer.com/chapter/10.1007/978-3-032-12968-0_1#DOI |journal=Strategic Innovative Marketing and Tourism |pages=4, 5 |via=Springer}}</ref>
 ==Why it is a problem==
 ===Price discrimination===
+According to U.S. law, "Price discrimination is illegal if it is based on impermissible factors like race, gender, religion, or nationality. So stores can't charge men and women different prices for the same product."<ref>{{Cite web |date=25 Mar 2026 |title=Is Dynamic Pricing Legal? |url=https://www.findlaw.com/legalblogs/small-business/is-dynamic-pricing-legal/ |url-status=live |access-date=25 Mar 2026 |website=FindLaw}}</ref>
 ===Privacy concerns in digital marketing===
+Dynamic pricing involves highly personal and identifying consumer data for individual price determination, which raises serious concerns about privacy.<ref name=":0" /><ref name=":1" /> <!-- This next part is almost completely copied from the citation. Feel free to rewrite. -->The problem stems from the collection of fine-grained consumer behavior data, as well as the lack of transparency around that data collection. The driving force for algorithmic pricing models, especially personalized pricing, is tracking cookies. This data, which includes browsing activity such as clicks, and past page visits, as well as personal information entered on the site, can be used to finely infer the tastes, income, health etc. of the individual.
+Many consumers are unaware that this information is even being collected, and merchants do not have to ask explicit consent to use tracking cookies for pricing purposes. The onus is left to the consumer to protect themselves if they do not want to be targeted for personalized marketing. This data collection creates a massive informational advantage for companies, which may offset the price advantage that a consumer can gain due to the ease of searching online. It also limits a consumer’s ability to plan future purchases, as prices constantly fluctuate. These ethically “bad” features of algorithmic pricing may limit the economic freedom of the consumer, even if the moral “goods” tend to enable more choices.<ref>{{Cite web |last=Egan |first=Shannon |date=5 Apr 2021 |title=Mapping the Ethicality of Algorithmic Pricing |url=https://montrealethics.ai/mapping-the-ethicality-of-algorithmic-pricing/}}</ref>
 ==Examples==