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6 Va. J.L. & Tech. 1 (2001)
Online Dynamic Pricing: Efficiency, Equity and the Future of E-Commerce

handle is hein.journals/vjolt6 and id is 267 raw text is: 6 Va. J.L. & Tech. 11 (2001), at http://www.vjolt.net
O 2001 Virginia Journal of Law and Technology Association
UNIVERSITY OF VIRGINIA         SUMMER 2001            6 VA. J.L. & TECH. 11
Online Dynamic Pricing:
Efficiency, Equity and the Future of E-commerce
Robert M. Weiss*
ay K. Mehrotra**
I.    Introduction
II.    The Lessons of istory Dere ulation and theAirline Indust
III.   The New Technoloa
IV.    The Economics Behind Dy
V.     T   L    io      n     Pi
VI.    Conclusion
I.     Introduction
1. Customers of Amazon.com, the behemoth e-commerce retailer, were recently startled and quite upset
when they learned that the online mega-store was charging different customers different prices for the
same DVD movies.J_11 Amazon, it appears, was engaging in a form of dynamic pricing - an innovative
pricing mechanism made possible by recent advances in information technology. By using the plethora
of information gathered from customers - ranging from where they live to what they buy to how much
they have spent on past purchases - dynamic pricing allows online companies to adjust the prices of
identical goods to correspond to a customer's willingness to pay. Although Amazon later denied that it
was dynamically pricing its DVDs, explaining instead that the price variations were part of a random
price test, many customers were left unconvinced.i2J Amazon and other e-commerce retailers are not
the only businesses applying new technologies to pricing systems. Even one of America's best known
brick-and-mortar companies, Coca-Cola, was reported to have been recently testing vending machines
that adjust the prices of soft drinks according to the surrounding temperature._3J If industry analysts are
correct, dynamic pricing is not just a passing phase, but will soon be a vital part of all commerce in the
twenty-first century.L4J
2. Dynamic pricing is not a new concept. As the economist Paul Krugman has pointed out, dynamic pricing
is merely a new version of the age-old practice of price discrimination.r5J Yet, what is new about today's

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