Dynamic pricing: economic efficiency, or subtle price gouging? [Video]

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For years, airlines, accommodation websites, and ride hailing apps have been adjusting their prices in real time, responding to periods of higher and lower demand. It’s known as dynamic or surge pricing, but powered by algorithms and artificial intelligence, surge pricing is now being used across a growing number of consumer industries, from theme parks to restaurants, retail outlets, and rock concerts.

In the retail industry, the practise is especially prevalent in online marketplaces. Amazon changes prices 2.5mn times a day across all its product lines, using millions of real time data points to benchmark against competitors and track demand surges. For sellers, dynamic pricing allows a product to have multiple price points, which can lead to increased revenues. A 2018 study by researchers at MIT found that dynamic pricing boosted airline revenues by between 1 per cent and 4 per cent.

One barrier to surge pricing for bricks and …