DYNAMIC PRICING: THE FUTURE OF RETAIL BUSINESS

Abstract

Dynamic pricing is a pricing strategy in which businesses set flexible prices for products or services based on current market demands. Businesses are able to change prices based on algorithms that take into account competitor pricing, supply and demand, and other external factors in the market. Dynamic pricing can be found in a wide variety of industries such as hospitality, travel, entertainment, and retail. The practice is spreading to physical retailers, which are installing electronic price displays and borrowing pricing models from e-retailers. The aim of dynamic pricing is to increase revenue and profit. Accordingly, the fundamental objective of this paper is to investigate effects of dynamic pricing in retail industry i.e. how demand responds to changes in price. This paper is dedicated to simulation models in terms of competition systems. Findings of this study should represent real-life situations, and provide a realistic way that leads to the maximum expected revenue and profit.

Key words: retailers, dynamic pricing, demand, revenue, profit