Dynamic pricing, or surge pricing, traditionally used in airlines and tourism, is expanding across various sectors, adjusting prices based on real-time demand. While it can create savings opportunities for some consumers, others criticize it for exacerbating inequalities and creating financial barriers. This model, applied to concert tickets and ski passes, raises ethical concerns about extreme price fluctuations, leading to controversies over affordability and access. Ultimately, dynamic pricing risks reinforcing economic disparities in consumer experience.
Dynamic pricing, often known as “surge pricing,” has transitioned from being primarily associated with the travel and tourism industries to impacting a wide array of economic sectors. In the airline industry, this practice is referred to as “yield management,” while some companies label it “personalized pricing.” The core concept behind dynamic pricing is to adjust costs in real-time based on demand fluctuations. While certain shoppers hope to take advantage of lower prices, others criticize the frequent price increases that can lead to disparities based on financial means. Originating in air travel, dynamic pricing operates on a straightforward premise: modify prices to align limited service availability with varying demand levels. When tickets or accommodations become scarce, their prices surge to temper demand, and when supply increases, prices tend to drop.
There are three principal factors that justify the use of dynamic pricing: seasonal demand variations, perishability of inventory (as with airline seats that cannot be resold after a flight departs), and constraints imposed by limited stock. This approach fits perfectly with ticketed events like concerts, where the supply is fixed. In contrast, items like canned goods have a longer shelf life and don’t conform to this pricing strategy, indicating that not all markets will adopt this model, explains Florent Manotta, Sales Director at N&C.
Nonetheless, this pricing strategy prompts ethical dilemmas: how much can prices fluctuate before alienating customers? Generally, consumers are more accepting of increased airfares during peak seasons or train tickets during holidays. However, in the music industry, the abrupt nature of dynamic pricing—where ticket costs can skyrocket in mere moments—often meets with backlash.
The Impact of Dynamic Pricing on Online Shopping
In 2019, Val-Cenis, a ski resort in Savoie, became the pioneer in applying dynamic pricing to its ski passes. Following suit, other resorts like Sainte-Foy-Tarentaise adopted similar strategies, offering pass prices between 28 to 40 euros to incentivize early purchases. Christian Vigezzi, director of the Val-Cenis ski area, noted that this pricing model “makes skiing accessible to a greater number of people” by dynamically adjusting rates according to demand.
Major online retailers such as Amazon and Cdiscount have also embraced this approach, recalibrating their prices based on demand signals gathered from user location, purchasing history, and browsing patterns. Although consumers can take measures to evade these adjustments by disabling cookies or using private browsing modes, they often find themselves dealing with fluctuating prices as a regular aspect of online shopping.
Unequal Access Resulting from Dynamic Pricing
This evolving landscape of pricing is not universally embraced. For instance, when tickets for an Oasis concert were released in September, they quickly ignited controversy; initially priced at £150, they soared to £350 due to overwhelming demand. This kind of price escalation, previously noted at Bruce Springsteen performances, has even prompted an inquiry by the British Minister for Culture, Lisa Nandy.
While dynamic pricing holds the potential for savings for those who act quickly, it also raises the risk of exacerbating inequalities in access to various services. For many consumers, these erratic price changes create an additional financial hurdle, reinforcing the notion that this strategy essentially selects customers based on their willingness to pay.