Dynamic Pricing Is Everywhere. Here’s How It Really Works.

Ever searched for a flight, only to return a few days later to find that the fare has jumped? Or hailed a ride during rush hour or after a big event and paid far more than usual? That’s dynamic pricing at work.

The practice is widespread, affecting everything from flights and rideshares to sports and concert tickets. It’s also drawing scrutiny. In August, Sen. Elizabeth Warren warned on X that consumers should be worried.

“If it’s hot out, the cost of ice cream could go up. If it’s cold, tea bags could go up. It’s a way for giant companies to squeeze you even more,” she wrote.

But is dynamic pricing simply a way for companies to charge more—or can consumers benefit, too?

To understand how dynamic pricing works, and when it can help or hurt consumers, the Darden Report turned to Pnina Feldman, a professor of business administration at the University of Virginia Darden School of Business. Feldman studies how digital technology shapes operations strategy, pricing and consumer engagement, including ticket markets.

What is dynamic pricing and how does it differ from variable pricing, surge pricing and routine price changes?

Dynamic pricing means that the firm changes the price to better match between supply and demand in response to real-time conditions. For example, prices change depending on how fast tickets are selling or how much inventory is left.

With dynamic pricing, these days with technology advances there’s an algorithm that is continuously asking, “Given what we know right now about the state of supply and demand, what should this price be?” Simply speaking, if demand is higher than supply, then the price goes up to better match supply with demand, and vice versa. If demand is lower than available supply, then the price goes down.

It helps to separate three terms that often get lumped together. Variable pricing is set in advance and doesn’t move. For example, a Saturday game costs more than a Tuesday game, front-row seats cost more than balcony. With variable pricing, prices do not change dynamically —prices are static and customers know the price before they shop.

Surge pricing describes the situation under dynamic pricing when demand exceeds supply and, therefore, prices rise (e.g., Uber after a concert lets out). Dynamic pricing is more general, because it includes both price increases and decreases depending on where demand falls relative to available supply.

Finally, ordinary price changes like a sale or a markdown are occasional and often predetermined.

What factors typically influence dynamic ticket prices, and which industries have embraced the practice most aggressively?

The big ones are remaining inventory until the event, and how actual sales compare to the forecast. Increasingly, resale-market prices matter, too. If tickets are trading on StubHub for triple face value, that’s a signal the primary price was too low. Some systems also factor in things like the opponent, the day of week, competing events and even weather.

Modern revenue management came out of airline deregulation in the late 1970s, and the airline industry remains the most sophisticated industry that applies these techniques. Hotels followed, then car rentals. Live entertainment, sports and ridesharing are the more recent—and sometimes controversial—adopters.

Why are concerts, sporting events and airlines especially well-suited to dynamic pricing? How does the model work in each industry?

They share three features: capacity is fixed (you can’t easily add seats to a sold-out arena), the product is perishable (an empty seat at kickoff is worth zero) and people buy well in advance of consuming, so the seller learns about demand as sales come in. That combination is exactly where dynamic pricing pays off.

Airlines run the classic version: a flight has fare “buckets” at different prices, and the revenue sharing algorithm opens and closes them as the departure date approaches and the demand forecast updates.

Sports teams adjust prices game by game. A playoff race prices very differently than a regular midweek game, and recently teams have also started changing prices for a particular game as they benchmark against secondary market sales.

Concerts are the newest adopter of dynamic pricing. Platforms like Ticketmaster now raise prices during the on-sale when demand is high, so the official price ends up closer to what resellers would have charged.

Is dynamic pricing likely to expand into other industries or consumer markets?

Yes, and it already is! It’s been applied in ski resorts, theme parks, golf courses and parking. San Francisco’s SFpark program, which I’ve studied, adjusts meter rates based on occupancy, and it demonstrably improved parking availability.

Electricity pricing is moving this direction. Restaurants are experimenting with peak and off-peak pricing. With the technology barrier essentially gone, even grocery stores could do it—though the backlash when Wendy’s floated the idea shows the social barrier would be challenging to overcome. The innovation that is receiving a lot of attention these days in the age of AI, but deserves more scrutiny is personalized pricing (i.e., different prices for different people rather than different times). This is more challenging to implement because it raises much thornier fairness questions.

What are the main benefits and drawbacks of dynamic pricing for consumers and businesses?

For businesses, the appeal is obvious: better matching of price to demand for a fixed, perishable asset means more revenue. The underappreciated risk is that customers adapt. In some of my research, we show that consumers become strategic in response to firm behavior. If you train people to expect price movement, they learn to time their purchases, and that learned behavior can erode the very gains the firm was chasing.

For consumers, it’s genuinely two-sided. The upside: off-peak buyers get real discounts, and tickets remain available at some price rather than vanishing to bots in the first minute. High prices in the primary market mostly redistribute money from resellers back to the artist or team. The fan was going to face a market price either way. The downside: unpredictability, complexity and the feeling of being charged whatever you’ll bear at your most eager moment.

What frustrations do consumers commonly have with dynamic ticket pricing, and how do businesses typically address those concerns?

The core frustration is fairness. For example, learning the person in the next seat paid half what you did and watching the price rise mid-purchase. In 2024, for example, fans waited hours to buy Oasis tickets and then found tickets advertised at £135 priced at over £350 at checkout, with no warning that prices could move. People accept that airfares move, but they haven’t yet accepted it for concerts, partly because fans feel a relationship with the artist that they don’t feel with an airline.

Firms respond with caps (ride-share platforms cap surge in emergencies), transparency about how pricing works and clever framing (e.g., discounts off a high list price land better than surcharges on a low one, even when the outcomes are identical). Often times, the firms and artists that get in trouble are the ones that spring it on customers. The ones that succeed announce the rules in advance and commit to them.

What strategies can consumers use to save money when buying tickets?

Flexibility on dates, times and seat quality is the best lever. Beyond that, consumers could use presales rather than the general on-sale panic window, set price alerts instead of monitoring manually and don’t ignore the resale market. For anything short of a guaranteed sellout, resale prices tend to fall as the event approaches, because a ticket is worth nothing at showtime.

Are there optimal times to purchase flights, concert tickets or other types of admission?

Less than the internet claims. The “book on Tuesday at midnight” rules are mostly myths. What does usually (but not always) hold: for domestic flights, roughly one to three months out is a reasonable window, longer for international and last-minute is almost always expensive because airlines know late bookers are business travelers.

For concerts and sports, it splits on whether the event will sell out. If it clearly will, buy at the on-sale because prices only go up. If it won’t, patience pays, and secondary market prices often drop in the final days. The honest answer is that the “best time” is less about the calendar and more about correctly guessing which of those two worlds your event is in.

Is there anything you think is most misunderstood about dynamic pricing that you’d want to set the record straight on?

First, resale markets and primary pricing are deeply connected. Much of the anger at dynamic pricing is really anger that market prices exist at all. When artists underprice tickets, they don’t make them cheap; they hand the difference to scalpers. Dynamic pricing is partly the industry reclaiming that money, and how the resale platforms themselves set their fees shapes those markets in ways we’re only beginning to understand. That’s the subject of my current research.

Second, dynamic pricing isn’t inherently anti-consumer. For example, congestion-based parking pricing in San Francisco made spaces easier to find and, by our estimates, improved welfare. This is not a zero-sum game. It is possible that the firm gains with dynamic pricing, but that customers can benefit from it as well. The design is what will ultimately determine whether consumers come out ahead.