madcorgi

It may be no surprise that companies like Amazon use "dynamic pricing" to extract maximum profits from you, but I learned some more details from my MBAs the other night.

Dynamic pricing adjusts the price so the company can discern (and extract) the highest price you will pay. They start out by offering you a price that they think you will pay, based on the data they have for you plus the data they have on the buying habits of millions of other folks. So, if you live in a wealthy zip-code and have a habit of impulse buying, they'll send show a high price. If you live in a less wealthy demographic, their first price may be lower. Dynamic pricing allows price adjustments throughout the demand buy/sell curve to basically custom tailor the highest price for each individual. As long as they make money above break even and can satisfy demand at each point on the curve, they maximize their profit. Sweet.

If you have any kind of significant online presence, they already know a lot about you--how old you are, size and type of your family, where you live, the value of your house, your income range. (If you are active and prone to over-sharing on Facebook, they know practically everything about your life.)

From your browsing habits, they know to a high degree of certainty if you have a baby coming, if you have elderly parents you need to care for, or if you have a terminal disease. Also more subtle things like how long you shop before you buy, and what types of online ads have triggered you to buy. Now, by applying artificial intelligence, they can fill in any gaps with a startling degree of accuracy.

Dynamic pricing allows companies to choose a price they think you will pay based on the data they have. If the tech platforms or Facebook see you searching for funeral services in Boston, they probably already know you have elderly parents there, and that one has likely died, and that therefore you are likely to pay a high amount for that flight to Boston you are researching. And on and on. Probably far more knowledgeable folks on the subject here than me.

What I learned the other night that was new to me (and fun) is that if you click on a pop up ad for a product you are looking at, but don't buy, they may adjust the price down if you visit again. I've recently been researching a Palmgren 30301 cross-slide vise, and get a lot of pop up ads for it. On an early check, Amazon had it listed at about $525 or so, discounted from $650 list. Armed with my new knowledge, I've been clicking on the pop ads for it each time I see them. As of last night, the price had worked its way down to $445.28. This morning, the pop up said $438.40, and tonight it was down a penny to 438.39, so they may be running out of room.

The ethics of all this is really interesting.