Value creation in an algorithmic world: Towards an ethics of dynamic pricing

Abstract

Choice of pricing strategy plays a central role in value creation and the effective functioning of markets. Shifts in technology and the growing availability of data are facilitating ever more innovative forms of pricing strategy. Within the emerging literature on pricing ethics, there is a gap in our understanding of the specific challenges of algorithmically generated dynamic pricing. Increasing pricing automation shifts the managerial focus from the selection of prices to the choice of algorithms. This paper expands the literature on pricing ethics by conceptualizing the ethical challenges raised by the contemporary use of dynamic pricing. We propose a governance model for algorithmically generated dynamic pricing, taking into account the role of the customer as a stakeholder in value generation.

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