What is dynamic pricing? | Kiowa County Press

Ticket prices for a coveted show can skyrocket. gilaxia/E+ via Getty Images

Ovunc Yilmaz, University of Colorado Boulder

Whether you’re booking a last-minute plane ticket or looking to get to a lackluster pre-season football game, you might encounter what’s known as dynamic pricing.

Using this strategy, companies adjust their prices according to demand. They can cut or raise prices as high as the market will support in real time to maximize the money they earn from sales.

In addition to Airlines companies and sports teams, Hotel chains, car rental companies, carpooling platforms, entertainment companies, cruise lines and any retailers selling seasonal products or hot items use dynamic pricing.

It uses specialized software and sophisticated algorithms to closely monitor the remaining number of products available, as well as the time remaining before the item is sold or wasted. Prices are adjusted accordingly.

Why dynamic pricing is important

The sports and entertainment industries have strong incentives to use dynamic pricing.

Because tickets to sporting and entertainment events can be resold, any discrepancy between their face value and what fans are willing to pay results in a market openings for brokers.

For popular events such as playoff games or once-a-decade tours, state-of-the-art brokers can collect a large number of tickets from the original seller and resell them at huge markups that don’t benefit sports teams, artists, or venues.

When a team, entertainment company, or vendor they have hired uses dynamic pricing, at least ideally, more ticket revenue is flowing into the pockets of those responsible for the events. In other words, if viewers will ultimately pay $249 to see Taylor Swift perform, it makes more sense for them to pay that amount to an official seller, not a reseller who paid $75 for tickets they didn’t. had never intended to use.

Outcry over Springsteen tickets

To maximize the money earned from sales, dynamic pricing makes sense. However, fair treatment is an important factor in pricing decisions since customers don’t want to be taken advantage of. This is probably why sports teams and entertainment companies were reluctant set prices at exorbitant levels that could harm their reputation.

When dynamic pricing makes people feel like they’re being ripped off, a public outcry can ensue. A good example happened in the summer of 2022 when Ticketmaster, the leading ticket seller and distributor in the United States, ventilators charged $5,000 each or more for some of the best seats for Bruce Springsteen’s 2023 Tour.

The company response generated a new wave of buzz with its neutral tone and lack of apologies. “Pricing and formats are consistent with industry standards for top performers,” Ticketmaster said.

The conversation

Ovunc Yilmazassistant professor of operations, University of Colorado Boulder

This article is republished from The conversation under Creative Commons license. Read it original article.

About Florence M. Sorensen

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