CHAPTER 8

Dynamic Pricing and ­E-Commerce

Pricing in the Age of Information Technology (IT)

Dynamic pricing is a new name for an old practice. At its heart, dynamic pricing is price discrimination in the world of IT. The fixed-price system that we are most familiar with is actually a relatively recent phenomenon. Before the Industrial Revolution led to assembly lines and large inventories, first-degree price discrimination was the rule rather than the exception. Merchants, rather than large corporations, offered goods and services. Price tags were never affixed to goods and it was up to merchants to extract consumer surplus through haggling.

The seeds of the fixed-price system sprouted when John Wanamaker opened his “Oak Hall” clothing store ...

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