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Essay on Microeconomics
Dynamic pricing is the dynamic adjustment of prices to consumers depending upon the value these customers attach to a product or service (Reinartz, 2001). A number of different terms have been used to describe dynamic pricing. These include flexible pricing and customized pricing. Dynamic pricing includes two aspects: (1) price dispersion and (2) price discrimination. Price dispersion can be spatial or temporal. In spatial price dispersion, several sellers offer a given item at different prices. In temporal price dispersion, a given store varies its price for a given good over time, based on the time of sale and supply-demand situation.
The other feature of dynamic pricing is differential pricing or price discrimination, where different prices are charged to different consumers for the same product. Dynamic pricing lets a company capture higher profits from those who are willing to pay more while expanding its customer base to include new customers who would never consider paying the prevailing price.Dell sells custom PC configurations at prices, which are different for different configurations. The Dell model is the ultimate in price differentiation in the sense of being implemented in terms of product differentiation...........
