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Tiffany Segui

BUS610 – Unit 2 DB

Submitted 01/16/2013

Thanks to advances in technology, businesses are able to gauge which products would be the best fit for each of their customers. This is done using a strategy called dynamic pricing. This type of pricing “utilizes real time data to adjust prices of goods or services continuously and instantaneous, in response to changing market conditions” (Kolakowski, 2011). Perloff (2007) provided the example of Amazon and how they used dynamic pricing to their advantage. Their website leaves behind a cookie that feeds information to Amazon’s web site and uses that to analyze aspects such as “their customer’s buying habits], how much they paid, [and] where they live” (393).

Amazon isn’t the only major retailer to use cookies to their advantage. Most companies use it to give them insight into a customer’s “browsing habits and purchase history [which] may in turn raise the price” (Gibbons, 2011). Gibbons (2011) explains if an item is looked at several times, the site will assume that you are highly interested in it and will in turn raise the price of that object.

For example, for the past few weeks I have been keeping tabs on airline prices for the month of May. And it seems that every time I log onto a site, the roundtrip air fare increases in price each time. Maybe it’s because I didn’t clear my cookies? Maybe it’s because I decided to travel to Puerto Rico during the month of May? I don’t know but I’m sure the airline knows better than to sell tickets at bargain price during a time where they can profit the most.

As with anything there are benefits and drawbacks to this type of pricing strategy. If Spirit Airlines decides to set their prices too high, the wisest option for me would be to look for lower airfare elsewhere. However, if they set their prices too low their profits won’t be as much as they had anticipated. Hamel (2011) notes that not only would customers feel cheated if they paid more for a ticket...