Marketing professor quoted in U. S. News dynamic pricing article

What Is Dynamic Pricing, and Why Has It Made Everything So Expensive?


Why is everything so expensive? Blame dynamic pricing. Oh, sure, you can blame other factors, like inflation and supply chain issues, but if high prices were a murder victim, dynamic pricing would be rounded up as one of the top suspects.

What Is Dynamic Pricing?

Dynamic pricing is a pricing and profit strategy that businesses use to sell to different groups of people, a tactic that’s tied into supply and demand, with a lot of emphasis on demand.

Or put another way, “Dynamic pricing is a computer algorithm that balances supply and demand in response to what people are willing to pay,” says Andrea Luoma, who runs the entertainment management program at the University of Montana College of Business.

“This is the buy early and save concept,” she says. “And dynamic pricing really isn’t much different from discounts for seniors, students, and military members. If there’s no demand, then prices will fall.”

What is increasingly different is how often dynamic pricing is being used – and it is changing the way we spend money in numerous industries.

Dynamic Pricing and Restaurants

Restaurants have done dynamic pricing for decades. Happy hours at bars is a form of dynamic pricing – letting customers know that if they come in during a less crowded and demanding time, they’ll be rewarded with cheaper drinks. If you’ve ever taken your kid to a restaurant on a quiet Tuesday evening because that’s when the restaurant has a “kids eat free” program, that’s an example of dynamic pricing. For the most part, restaurants didn’t do all that much dynamic pricing on their menus. For instance, Subway had that $5 foot-long deal years ago. No matter what time of day, you could go into a Subway and get a $5 foot long.

But that kind of pricing may eventually be a relic of the past. According to publications like, many restaurant chains are currently debating whether to utilize dynamic prices on a more regular basis, thanks to the growing popularity in the industry of digital menus. The prices on digital menus, after all, can be changed instantly and easily, making for the perfect dynamic pricing recipe. Eventually, it could become commonplace for restaurants to raise or lower prices by the hour or minute, depending how crowded the establishment is.

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