Flexible Figures

Another Economist article with a subtitle of "Dynamic Pricing" it discusses applying electronic price displays and constant price updates to retail stores and its impact.  Here is what it entails.

So basically, stores would use electronic displays to show the prices of their goods.  This obviously eliminates the need for people to run around replacing price displays and obviously saves time and paper.  However this is not all it does.  It allows stores to adjust their prices every few hours or even every few minutes.  Apparently prices are affected by things like the time of day, weather, competitor’s sales and any other condition imaginable.  As such a store can pinpoint when a discount is most needed to push the sales of certain goods, and as such some sales can last hours as opposed to days.  In effect the electronic pricing displays smooth demand by adjusting prices based on want and need.  This allows the rich to pay more as they may come in during specific times of the day, or buy certain goods more regularly during certain events while the poor will save money as they require cheaper prices thus prices will adjust to move sales to accommodate them.  However this is still expensive for stores to do in the short term and thus will, once it becomes more affordable switch over. 

In the meantime other businesses have embraced the model.  Sports events, concerts, zoos and similar that all sell tickets can and have used this technology of constant price adjustment to exploit demand for high value tickets while stimulating people to buy unwanted tickets by making those ones cheaper.  Thus demand is stimulated in one event or part of a concert hall while the other is curbed thus ensuring more seats are filled and maximizing profit.   Toll booths too can and have used this technology to adjust their prices every five minutes to get drivers to keep moving so as to avoid a higher price.  Airlines already use this too by charging more for frequent flyers due to thinking that trips are job related.  (Even Amazon adjusts their prices every hour).

There is a risk however as Uber found out the hard way.  Their reputation was damaged when their prices shot up 8 fold during and post hurricane event.  People saw it as price gauging even though it was merely them adjusting for all the variables that affect supply and demand for their services.  As such they have capped their cost increases to 3.5% maximum during such events.  

People also learn to play this price game as some people will go to internet cafes or areas which are considered poor and buy an item thus fooling the algorithms put in place.  Truth be told. I have no problem with this as it means people will go and do business in less affluent areas and thus stimulate that area’s economy buy also buying local goods.

Final Thought:  This is a great idea as people can save more money and businesses maximize profits thus keeping them in business in the first place.  Sure there are people who may not like being charged more which is why balance is needed, but the advantages in savings for businesses and people as a whole is too much to pass up.