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Dynamic Pricing Benefits & Drawbacks

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Select a company that uses or has used dynamic pricing, and respond to the following questions:

1. What is the definition of dynamic pricing?
2. How does the company you have chosen use dynamic pricing?
3. What are the benefits and drawbacks of dynamic pricing for that particular company?
4. Summarize your findings.

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The response addresses the queries posted in 1008 words with references.

//This paper will focus on dynamic pricing, therefore this section will deal with the description of dynamic pricing, the description of the company, which is the market leader in dynamic pricing. This section will also discuss advantages and the downside, the company is facing by using dynamic pricing. This explanation will further help in understanding the personal interest or connection with the firm//

Dynamic pricing is partly a technology based pricing system; in this prices are altered to different customers, depending on their willingness to pay. It also known as time based pricing or third degree price discrimination. This situation occurs when customers are divided into two or more groups with separate demand curve. In this, different prices are charged to each group of customers. Price discrimination practices can increase the profit of the company by capturing more consumer surplus and can bring success to the firm if used carefully (Fitzsimmons, 2013).

Industries such as airlines use heavily computerized systems to make changes or alterations in prices constantly. Thus, it can be said that dynamic pricing can be used in a broad range from constant to infrequent pricing changes (dynamic pricing, 2013).

//The next section will include the description of the company and other important information that will be helpful in developing and understanding the topic. It will involve a sufficient amount of information that will be helpful in assessing strategies and services of the firm clearly//

Diagonex technologies Inc. was founded in year 2000 and is located in Indianapolis of the United States. It is a software development company and develops ...

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The response addresses the queries posted in 1008 words with references.

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As discussed in Perloff's text, Dynamic Pricing is an extreme form of price discrimination, where each consumer is charged the most they would be willing to pay. See Perloff.

Since Perloff does not explicitly define dynamic pricing, you can discuss examples of fluid pricing or online auctions. It would be good to make the distinction between extreme, individualized price discrimination and fluid pricing. They are distinctly different practices. The former is predatory. The later is welfare enhancing.

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