Decoding Dynamic Pricing Strategy


The practice of varying the price of a product or service based on market conditions such as supply and demand and personal characteristics of the buyer has taken the e-commerce industry by storm. Known as a dynamic pricing strategy, this system of adjusting prices based on real-time demand and supply provides advantages and control to the company, but also has several ethical issues related to it. As a marketer, adjusting pricing based on customer demand and supply, the income of the customers, purchasing habits, and other demographic information such as age and location, seems like a lucrative strategy to increase revenue. However, how ethical is it for an airline to charge a frequent flyer more for a flight if the travel is for business and is paid for by the employer? How ethical is it for a service provider such as Uber to surge its rate depending on the real-time demand for its service? This case offers an overview of a dynamic pricing strategy from the perspective of both the companies and their customers, and provides some related ethical and legal implications.

This case was prepared for inclusion in SAGE Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.

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