Amazon’s Dynamic Pricing Causes Concern


As Hurricane Irma bears down eastern Florida, consumers in the region have seen prices surge. For instance, consumers report that a case of Nestle water in Florida is priced at $25 on Amazon Prime while the same case sells for $18.50 elsewhere on the Eastern seaboard. After accusations hit Twitter, an Amazon spokesperson released a statement that explained Amazon’s pricing mechanisms. The spokesperson said, “Amazon prices do not fluctuate by region or delivery location. Prices on bottled water from Amazon, and third-party sellers that are doing their own fulfillment to customers have not widely fluctuated in the last month.”

In other words, Amazon does not participate in surge pricing and price fluctuations have more to do with area supply and demand than they do with price gouging.

But consumers don’t like it. Surge pricing is the mechanism behind Uber’s infamous price discrepancies. While Amazon doesn’t practice surge pricing it does engage in what it refers to as dynamic pricing. Dynamic pricing causes an increase in price as demand climbs. Amazon told CBS news that dynamic pricing reflects a world market that is constantly fluctuating.

A quick check of a price-tracking website did show that Nestle water’s price has increased globally. But for those who are stocking up in the face of a storm, sudden price increases seem like price gouging.

Another factor to consider, and one that takes the heat off Amazon, is that third-parties sell through Amazon. This means that any sudden increase in prices could be on the part of the vendor and not on Amazon itself.

It is difficult to dismiss the accusation of price gouging, or overlook the neutrality of the market when it comes to surge pricing, or dynamic pricing. When Best Buy sold water for $42 a case during Hurricane Harvey, consumer pressure forced the company to lower its price and offer an apology. So although supply and demand drive markets, consumer behaviors and choices also play a role.

Economist Mark Perry of the University of Michigan reflected that price spikes during times of disaster are actually good because it strengthens the market economy. But many factors make up a strong market. Where Twitter and public shaming fail, consumers can show their power with their purse.


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