Posted in Marketing and Strategy Terms, Total Reads: 1061
Definition: Dynamic Pricing
Dynamic pricing is also known as time-based pricing or third-degree price discrimination. It mostly occurs for customers of two or more separate groups with separate demand curves. In this case different prices are charged to each group. Some of the reasons for using dynamic pricing are
Dynamic pricing boosts goals of the revenue maximization
Dynamic pricing incentivizes consumers with a greater sense of price certainty
Dynamic pricing allows consumers the flexibility to acquire significant savings
Thus it increases the profit of a firm by capturing more consumer surplus. However, due to the possibility that firms can charge prices based on consumer history and profiling due to the advent of technology, this pricing is surrounded by some ethical issues.