The concept of dynamic pricing, also referred to as surge pricing, uses the dynamic and automated adjustment of prices based on market conditions.
In business sectors such as the hotel industry, the fuel industry or airlines, dynamic pricing has long been common practice. Petrol prices, for instance, are adjusted several times a day and pricing is based on competition, weekdays and times of the day. Yet, the full potential of dynamic pricing is most evident in online trading. Here, intelligent algorithms provide the basis for automated pricing using predefined rules, filters and the evaluation of huge databases to set prices. It is not uncommon for online retailers like Amazon, to change the price for a single product up to 70 times per week. The goal of dynamic pricing is to maximize the profit of the provider. In addition to capturing the maximum willingness to pay, aspects such as the optimization of stock levels, and thus cost savings, are also in the focus of automated pricing.