Is Dynamic Pricing Going Away?

Dynamic pricing allows businesses to rapidly adapt to shifts in supply and demand. By accepting the fact that the willingness-to-pay of consumers and opportunity costs of firms fluctuate, businesses can set prices accordingly and optimize performance. By going beyond the idea of adjusting prices to evolving costs, dynamic pricing is the convergence of four previously independent worlds:

1. That of economists and statisticians, estimating demand curves;
2. Mathematicians, modelling optimization problems, and more recently game-theory frameworks;
3. Information technologists, building digital systems and infrastructure, and finally;
4. Executives within organizations facing pressure not to go extinct

Each of these dimensions has a longer pedigree than you might think – empirical work on demand curve estimation dates back to the seventeenth century (Davenant, 1699).…