Corporate fascination and consumer rejection
Dynamic pricing is one of those concepts that, the moment it is mentioned, triggers an uncomfortable mix of fascination and rejection. Fascination from a business perspective, because it can enable revenue optimization almost in real time. Rejection from the consumer’s point of view, because it is often perceived as a sophisticated —and sometimes inelegant— way of squeezing their wallet to the limit.
Being honest, in many cases that perception is not entirely wrong.
What dynamic pricing really is
Dynamic pricing is a pricing strategy in which the price of a product or service is not fixed, but adjusted based on a set of internal and external variables:
- demand fluctuations
- stock availability
- timing
- historical user behavior
- the existence (or not) of secondary markets
- the competitive context
It is not new. What is relatively new is the technological capacity to apply it at scale, in an automated and granular way. And that is where the real debate begins.
Sectors where it applies (and where it makes sense)
Not all industries are equally suited to dynamic pricing. It works particularly well where three conditions converge:
- Limited or perishable capacity
- Volatile or unpredictable demand
- Low marginal cost once capacity is created
That is why we naturally see it in sectors such as:
- Air and rail transport: Continuous price adjustments based on booking lead time, expected occupancy, route-level elasticity, and the management of perishable capacity, with the objective of maximizing revenue per seat.
- Hotels and tourist accommodation: Rate variation driven by expected demand, seasonality, local events, and availability, optimizing RevPAR across a limited, non-storable inventory.
- Ticketing (sports events, concerts, shows): Price modulation based on sales velocity, event popularity, proximity to the event date, and the willingness to pay of different customer segments.
- On-demand mobility (ride-hailing): Real-time dynamic pricing designed to balance localized supply and demand, incentivizing driver availability during peak demand periods. It has happened to all of us when requesting an Uber.
- Energy: Variable pricing linked to marginal production costs, real-time demand, and resource availability, transferring price signals directly to consumption behavior.
- E-commerce in highly competitive or high-rotation categories: Automated price adjustments based on competitor pricing, inventory levels, product turnover, margin targets, and user behavior to protect profitability without sacrificing volume.
In purely physical, non-perishable products, dynamic pricing also exists, but tends to be more tactical and less extreme. In intangibles or time-constrained services, it is structural.
Adjusting prices vs. squeezing revenue
Here it is worth making a distinction that is often overlooked. Not all dynamic pricing strategies pursue the same objective.
There are scenarios where the primary goal is to balance supply and demand. Prices are adjusted to smooth peaks, avoid operational inefficiencies, or redistribute demand over time. For example, raising prices to discourage excessive demand during peak hours or lowering them to stimulate demand in off-peak periods. From the outside, this is often perceived as reasonable, even logical.
Then there are scenarios where the goal is to capture the maximum possible revenue. Not to balance anything, but to maximize. To extract every additional euro the market is willing to pay at each micro-moment. This is where things become more slippery.
Because when the system is designed to identify how far the willingness to pay goes for each segment (or even each individual), the result may be a technically optimal price, but a socially questionable one.
The problem of (perceived) greed
It is difficult to apply revenue-maximizing dynamic pricing without it being perceived as greed. And not because the company is inherently more avaricious than others, but because the mechanism leaves little room for narrative.
When a consumer sees that a ticket, a room, or an entry costs 40% more today than yesterday, without anything “visible” having changed, the interpretation is immediate: they are charging me more because they can. And usually, that is true.
The nuance is that dynamic pricing does not create that willingness to pay; it merely reveals it and captures it. From the consumer’s perspective, however, the distinction is irrelevant.
Dynamic pricing = increasing prices?
Another common mistake is to associate dynamic pricing exclusively with rising prices. In theory, dynamic prices should move in both directions. Up when demand exceeds supply, and down when the opposite occurs.
In practice, however, many markets show a structurally upward trend. Why? Because capacity is rigid, demand tends to concentrate at specific moments, and the risk of ending up with unsold capacity is lower than the risk of selling it “too cheaply” too early.
This creates the feeling that “dynamic” is merely a euphemism used to justify constant price increases. And in many cases, it is.
Capturing willingness to pay
The key concept behind dynamic pricing is willingness to pay: how much a specific customer is willing to pay for a specific unit at a specific moment.
From an economic standpoint, capturing the maximum willingness to pay is pure efficiency. From the customer’s point of view, however, when the price aligns with the absolute maximum someone can afford, there is no room left for a sense of “fairness.” The customer may feel that, rather than making a good purchase, they have survived a silent auction.
Over time, this generates rejection, mistrust, and an active search for alternatives —even worse ones.
Scarcity as the engine of everything
If there is one concept that explains everything in dynamic pricing, it is scarcity. Scarcity —real or perceived— accelerates demand. It forces earlier decisions, reduces comparison, and increases price tolerance.
In physical products, this implies deliberate decisions to limit units. And pretending does not work: if there is no clear and credible risk of “running out,” scarcity fails.
In intangible products with time-limited capacity (hotels, flights, tickets), scarcity is structural. Units are capped and time works against the buyer. Every minute that passes means less stock and less room to maneuver.
That is where the countdown appears. Not only are there few units left; they are disappearing now. And that combination is lethal to consumer rationality.
A final reflection
Dynamic pricing is neither good nor bad in itself. It is a tool. An extremely powerful one. But like any powerful tool, it amplifies the strategic decisions behind it.
Used to manage capacity and improve efficiency, it can create value for both sides. Used exclusively to squeeze the last possible euro, it usually does so at the expense of trust.
And trust, unlike price, is not dynamic. Once lost, it rarely comes back down.
