Dynamic Pricing: Exploring Ethical Issues & Analytics Implementation

This essay examines the practice of dynamic pricing, where different prices are charged to consumers for the same product based on factors like purchasing behavior and competitor pricing. It highlights ethical concerns such as unfairness to consumers paying higher prices and breaches of privacy through personal data collection without consent. The essay also discusses the role of excel and pricing analytics in maximizing revenue by determining optimal prices based on shopper data and algorithms. It emphasizes the importance of considering ethical implications and ensuring transparency in dynamic pricing strategies. Desklib offers a wealth of resources, including past papers and solved assignments, to help students further explore this topic.

Dynamic pricing refers to the practice where differential price for the same product may be
charged to different consumers based on the underlying consumer coupled with other factors
such as competitor pricing, mismatch between demand and supply. This is quite often
implemented by online shopping sites that tend to consider our purchasing behaviour and
hence adjust the price accordingly (Duin, 2017). For instance, if a consumer tends to shop at
premium fashion sites, then the price would be adjusted higher for such a consumer as the
consumer would not paying a high price for the given product or service. It is noteworthy
that there are other variables which also tend to dictate the dynamic pricing. In real time, a
host of variables tend to be changing which may necessitate change in prices. This is
apparent from the surge pricing applicable for UBER which tends to be applicable when there
is higher demand of cabs and the supply is lower (Baird, 2017).
It is imperative to consider the ethical considerations with regards to dynamic pricing. One
of the key ethical concerns regarding dynamic pricing is that the same product or service is
offered to different consumers at different prices which puts the consumer paying a higher
price at a disadvantage and results in injustice. It is noteworthy that there are certain
situations in which dynamic pricing is indeed justified. However, charging different prices to
consumer based on their location is clearly unethical. Another ethical consideration related to
dynamic pricing relates to breach of privacy. This happens because the dynamic pricing
practice tends to rest on personal data collection about user behaviour and identity. Such data
is stored and used a create a profile of the customer without the permission of the customer.
Thus, while people may consider that they are anonymous on the internet, there really can be
identified through their computer and a lot of personal details can be revealed. This clearly is
leading to a situation where the consumers have limited information about the company but
the company has significant information about the consumer which can be disturbing and
disconcerting (Faruqui, nd).
Considering that the online shopping and other online transactions are done in real time
where prices typically need to alter in seconds, hence excel and pricing analytics have a
significant role to play. The key objective to be met through the use of these tools is to
maximise the revenue. This will involve deciding on a price which would ensure that the
customer does tend to buy the product while ensuring that a higher price is charged tapping
on the willingness to pay on the part of consumer. The price analytics typically use multiple
data points pertaining to the underlying shopper coupled with established algorithms to arrive
at optimum prices. These algorithms are typically run using Excel to determine the

effectiveness of the pricing mechanism. The use of excel along with predictive analytics
tends to form the basis of implementation of dynamic pricing and hence considered vital
elements (Dataiku, nd).

References
Baird,. N. (2017) Dynamic Pricing: When Should Retailers Bother?, Retrieved from
https://www.forbes.com/sites/nikkibaird/2017/04/18/dynamic-pricing-when-should-
retailers-bother/#28f63cac21be
Dataiku (n.d.) Dynamic Pricing with Predictive Analytics, Retrieved from
https://pages.dataiku.com/hubfs/Success%20Story%20Pricemoov.pdf
Duin, S. (2017) Dynamic Pricing, Retrieved from
https://www2.deloitte.com/nl/nl/pages/data-analytics/articles/dynamic-pricing.html
Faruqui, A. (n.d.) The Ethics of Dynamic Pricing, Retrieved from
https://pdfs.semanticscholar.org/db0b/ae4358046a3f8c539b4c88cac60a1476612e.pdf