While dynamic pricing has several advantages, there are also some threats related to it. The most important one is price discrimination, but there are also other disadvantages.
What is Price Discrimination?
As the term already signifies, with price discrimination the company charges a different price to different customers for the same quality and quantity of a product. Price discrimination has existed for decades, if not longer. Actually dynamic pricing is the ultimate form of price discrimination where prices are increasingly adopted based on factors as time, behavior and personal profile.
In most cases, it is not illegal as there are no laws against differing a price based on time and region.
Where price discrimination becomes dubious is on criteria like:
- Age: Often children and seniors are given discounts as they have less income.
- Occupation: Students get discounts in many countries. In some countries it is accepted that veterans and other high-risk public servants (police, firemen) receive discounts.
- Color: Especially in poorer tourist locations, white people usually pay more than the local population.
- Gender: At dating sites, women usually pay less or even nothing to meet the demand of men.
When does Price Discrimination become troublesome?