Difference between revisions of "Dynamic Pricing Algorithms"
| Line 3: | Line 3: | ||
== History of Dynamic Pricing == | == History of Dynamic Pricing == | ||
| − | Dynamic Pricing has mainly grown out of two areas of research: statistical learning and price optimization<ref> den Boer, Arnoud. (June 2015). [https://www-sciencedirect-com.proxy.lib.umich.edu/science/article/pii/S1876735415000021 "Dynamic pricing and learning: Historical origins, current research, and new directions"] ''Surveys in Operations Science and Management Science''. Retrieved January 24, 2023.</ref>. Statistical learning refers to how dynamic pricing algorithms are able to adjust prices based on numerical data collected over time, and price optimization involves calculating prices that maximize revenue for a business. In the late 1970's, the airline industry was one of the first main players to use dynamic pricing | + | Dynamic Pricing has mainly grown out of two areas of research: statistical learning and price optimization<ref> den Boer, Arnoud. (June 2015). [https://www-sciencedirect-com.proxy.lib.umich.edu/science/article/pii/S1876735415000021 "Dynamic pricing and learning: Historical origins, current research, and new directions"] ''Surveys in Operations Science and Management Science''. Retrieved January 24, 2023.</ref>. Statistical learning refers to how dynamic pricing algorithms are able to adjust prices based on numerical data collected over time, and price optimization involves calculating prices that maximize revenue for a business. In the late 1970's, the airline industry was one of the first main players to use dynamic pricing as a result of more relaxed legislation from the United States congress.<ref> Goldstein, Jacob. (June 17, 2015). [https://www.npr.org/transcripts/415287577 "The Birth and Death of the Price Tag"] ''NPR's Planet Money''. Retrieved January 24, 2023.</ref>. Up until that point, the prices of airline tickets were set by the government. When the federal government gave airline companies autonomy over ticket pricing, dynamic pricing was developed in the industry. |
| + | |||
| + | |||
| + | With the advent of the computer revolution, dynamic pricing has grown increasingly complex. Although early dynamic pricing was mainly based on supply and demand conditions within the market, modern applications can use highly complex variables like customers' purchase histories and locations. | ||
== Types of Dynamic Pricing Algorithms == | == Types of Dynamic Pricing Algorithms == | ||
Revision as of 23:51, 25 January 2023
Dynamic Pricing is a type of pricing method that adjusts prices for items based on real-time market conditions[1]. This is typically achieved by using algorithms inputting variables like competitors' prices, supply and demand quantities, customers' demographics and personal preferences, seasonal factors, and more[2]. As a result of the growth of the internet and consequently an increase in online transactions, a variety of industries utilize dynamic pricing as part of their business model. Common industries that implement dynamic pricing include advertising, entertainment, sports, airline travel, utilities, and the e-commerce industry as a whole[3]. Dynamic pricing can allow companies to collect greater profits because of rapid price adjustments, but sometimes raises ethical concerns related to areas of data privacy, social inequality, information integrity, and more.
Contents
History of Dynamic Pricing
Dynamic Pricing has mainly grown out of two areas of research: statistical learning and price optimization[4]. Statistical learning refers to how dynamic pricing algorithms are able to adjust prices based on numerical data collected over time, and price optimization involves calculating prices that maximize revenue for a business. In the late 1970's, the airline industry was one of the first main players to use dynamic pricing as a result of more relaxed legislation from the United States congress.[5]. Up until that point, the prices of airline tickets were set by the government. When the federal government gave airline companies autonomy over ticket pricing, dynamic pricing was developed in the industry.
With the advent of the computer revolution, dynamic pricing has grown increasingly complex. Although early dynamic pricing was mainly based on supply and demand conditions within the market, modern applications can use highly complex variables like customers' purchase histories and locations.
Types of Dynamic Pricing Algorithms
Industry Usage
Controversy Case Studies
Coca Cola
Ethical Dilemmas with Dynamic Pricing
Data Privacy
Social Inequality
Information Integrity
- ↑ pwc.de. (June, 2020). "Ethical Aspects of Dynamic Pricing" PricewaterhouseCoopers GmbH. Retrieved January 25, 2023.
- ↑ Wakabayashi,Daisuke. (February 6, 2022). "Does Anyone Know What Paper Towels Should Cost?" New York Times. Retrieved January 25, 2023.
- ↑ Bertini, Marco & Koenigsberg, Oded. (September 2021). "The Pitfalls of Pricing Algorithms" Harvard Business Review. Retrieved January 24, 2023.
- ↑ den Boer, Arnoud. (June 2015). "Dynamic pricing and learning: Historical origins, current research, and new directions" Surveys in Operations Science and Management Science. Retrieved January 24, 2023.
- ↑ Goldstein, Jacob. (June 17, 2015). "The Birth and Death of the Price Tag" NPR's Planet Money. Retrieved January 24, 2023.
