Dynamic Pricing - Can consumers achieve the benefits they ... · Big data offers a gold mine of opportunity, driving many marketing and pricing decisions, and with obscure and easily

DynamicPricing–Canconsumersachievethe

benefitstheyexpect

2017

Dynamic Pricing – Can consumers achieve the benefits they expect 9

TableofContentsI-ExecutiveSummary 6

Goal 6

Background 6

Methodology 6

KeyFindings 7

Recommendations 9

II-Introduction 12

DeEinitions 12

TheSituation 13

FactorsthatLedConsumersCouncilofCanadatoConductthisResearch 14

TheConsumerInterest 15

KeyQuestionsList 16

III-MethodologicalOverview 17

EnvironmentalScan&LiteratureReview 17

PublicInterestNetworkQuestionnaire 17

FocusGroups 18

OnlineConsumerSurvey 18

KeyInformantInterviews 20

ConsumerProtectionFramework 20

IV-Research 22

Consumers Council of Canada Table of Contents

Dynamic Pricing – Can consumers achieve the benefits they expect =

FindingsfromtheEnvironmentalScanandLiteratureReview 22

FindingsfromthePublicInterestNetworkQuestionnaire 41

FindingsfromtheFocusGroups 44

FindingsfromtheOnlineSurvey 48

FindingsfromtheKeyInformantInterviews 56

V-FrameworkDiscussionResearchQuestions 63

ConsumerProtectionFramework 63

Discussion 65

StakeholderAnalysis 78

VI-ConsumerProtectionFrameworkRecommendations 98

VII-References 106

VIII-Appendices 116

Notes 147

Dynamic Pricing – Can consumers achieve the benefits they expect >

Copyright

©2017,ConsumersCouncilofCanadaHowardJ.Deane,DynamicPricing-Canconsumersachievethebene6itstheyexpect

AbstractThisresearchsetsoutthepossibleharmstoconsumersfrompotentiallyexploitative

pricingpracticesasretailbusinessmovestomoreextensiveuseofdynamicpricing,whatconsumerscandotoprotectthemselves,howawaretheyareoftherisks,andwhatbusinessandgovernmentcandotoensureconsumers’rightsareprotected.Keywords:dynamicpricing,discriminatorypricing,BigData,retail,e-commerce

Dynamic Pricing – Can consumers achieve the benefits they expect ?

AcknowledgementsConsumersCouncilofCanadahasreceivedfundingfromInnovation,Scienceand

EconomicDevelopmentCanada’sContributionsProgramforNon-proEitConsumerandVoluntaryOrganizations.TheviewsexpressedinthisreportarenotnecessarilythoseofInnovation,ScienceandEconomicDevelopmentCanadaoroftheGovernmentofCanada.TheCouncilespeciallythanksKernaghanWebb,whoprovidedmethodologicaladvice,

reviewandcomment.

Dynamic Pricing – Can consumers achieve the benefits they expect @

IExecuFveSummary

GoalThegoalofthisresearchwastodetermine,withinaconsumerprotectionframework,the

sourcesofharmtoconsumersfromlackofawareness,misleadingpractices,ormisuseofdynamicpricing,whatconsumerscandotoprotectthemselves,andwhatbusinessandgovernmentcandotoensureconsumers’rightsareprotected.

BackgroundDynamicpricingisnotnew.ItexistedlongbeforeshopkeeperJohnWanamakerstucka

pricestickeronajarofbeans.It’sbeenonacomebackfordecades.Whilepreviouschangeswereobvious,recentchangesarelesstransparent.Technologyfuellede-commerceprovidesbusinesssigniEicantopportunitiestouseconsumerinformationtopriceproductsandservices,ofteninwaysconsumersdon’tknoworunderstand.Businesses,somereelingfromgreaterpricetransparencyaffordedbytheInternet,may

beseekingnewwaystoachievepricingopaqueness.Bigdataoffersagoldmineofopportunity,drivingmanymarketingandpricingdecisions,

andwithobscureandeasilybypassedprivacyconsentrulesandpractices,difEiculttoenforcecompetitionregulations,alackofconsumerawareness,andconsumerconfusionregardingbeneEitsandprivacy,itcanbeeasilyabused.ForconsumerstherecanbeconElictandconfusion.Theyoftengiveuppersonal

information,overestimatingthebeneEitandunderestimatingthedownstreamcosts.Theiractionsoftenbelietheirintent,asmostconsumersindicatetheyhaveconcernsovertheuseoftheirpersonalinformation.

MethodologyThisresearchfocusedprimarilyonconsumerandexpertviewsonhowconsumers

canbebetterprotectedinaneraofincreaseddynamicpricing.Multiplemixedmethodsofgatheringevidencewereused,tocoverdifferentperspectives,andtoreducechancesofmissingrelevantinformation.ThemethodologyincludedaninitialenvironmentalscanandliteraturereviewandtwoquestionnairesoftheCouncil’sPublicInterestNetworktodeterminegeneralissuesandpossiblesolutionswithdynamicpricingin

Consumers Council of Canada Executive Summary

Dynamic Pricing – Can consumers achieve the benefits they expect C

themarketplace.Thisshapedtheconductoffocusgroupsanddevelopmentofthekeyinformantinterviewguide.Anonlinesurveyofarepresentativesampleof600Canadiansbyage,locationandgenderwasusedtoobtainviewsonthefairnessofarangeof10typesofdynamicpricing,includingtraditionaldiscounting,moretechnologicallyenabledsupplyanddemandpricing,andtheuseofdemographicandpersonalinformationtosetindividualizedprices.FourfocusgroupsconductedbyEnvironicsInc.,oneineachofFrenchandEnglishin

MontrealandtwoinEnglishinToronto,gatheredconsumers’perspectives.Keyinformantsfromarangeofstakeholderswereinterviewedtobringmultiple

experiencedperspectivestotheresearch.Mucheffortwasexpendedtoeliminatebiasintheresearch,whichyielded

informationevaluatedinadynamicpricingconsumerprotectionframework.AnalysisidentiEiedbusinesspressuresandothersourcesofpotentialmisusedor

misleadingdynamicpricingpractices,contributingtothedevelopmentofrecommendationstobusiness,regulators,consumers,andstandardsorganizations.Ingeneral,aspartofourresearchforthisproject,surveys,focusgroups,etc.,wereused

toassistinbetterunderstandingtheperspectivesofdifferentactorsinvolvedindynamicpricingcontexts,butnogeneralizationsshouldbemadeabouttherepresentativenessoftherespondentscontactedforthisresearch.

KeyFindings

|ConsumerAwareness,BenefitsandHarms• Consumershavealowawarenessofpricingbasedonbehaviourorpersonal

information.Whenmadeawareofsuchpracticestheirreactionisoftendecidedlynegative.

• Theyviewpricingbasedontechnology-enabled,advancedsupplyanddemandcalculationswithsomeuncertainty.Theyviewtraditionaldynamicpricing,(e.g.,age/volumediscounts)asfair,oratleasttolerable.

• BeneEitscanarisefromdynamicpricingforthoseconsumerswhohavethetime,diligenceandacumentodeterminethebeneEit,andactonit.ThesebeneEits,though,accruemorefromthetraditionaldynamicpricingmodels,thantechnologyorinformationenabledmethods.

• Consumerswillhavegrowinguncertaintycomparison-shoppingonline,astheymaynotknowwhetheranofferedpricewillstillbeavailableiftheycompareelsewhere.Furthermore,theymayhavenowaytopredictreasonablywhatindividualizedpricemaybeofferedbyanotherseller.

• Consumersdotakeadvantageofsomemarketsourcedsolutionssuchaspriceandofferaggregators.


Dynamic Pricing – Can consumers achieve the benefits they expect D

|BusinessRaFonale,PracFces&Barriers• TherecentsigniEicantincreaseinpricetransparency,asconsumershavemoreprice

informationontheInternet,hasincreasedbusinessinterestincreatingpricingopaqueness.Retailersarelookingforwaystocombattheimpactofwell-informedconsumerswillingtoshopbasedonprice.

• Dynamicpricingcouldbesoattractive/proEitabletoretailersthattheyignoreitattheirperil.Holdingtheupperhandintheapplicationofdynamicpricingcouldencourageexploitation.

• Manydynamicpricingmodelsexist,andtheirvariantsandcomplexityincreasecommensuratewithincreasesinonlineshopping,bigdata,mobiletechnologyandalgorithmscapableofsigniEicantrelevantcorrelations.

• Practicesrangefromtraditional(seniororvolumediscounts,loyaltyprograms,pricematching),totechnologyenabled/enhancedsupplyanddemand(UberSurgePrices,Amazonfrequentpricechanges,sportsticketspremiumpricing)throughtotheuseofdemographic,behaviouralandpersonalinformationtotailorindividualizedpriceswithagoalofproEitmaximization,inventorymanagement,and/ormarketdominance.

• Thereisevidenceofevenso-called‘bricks-and-mortar’retailersworkingactivelytodevelopwaystosetpricedisplaysdynamicallyforgoodsonshelves.

• Inandofthemselves,suchmethodsaretypicallylegal,butlargelyinvisibleandsometimesmisleadingtoconsumers,particularlywherebehavioural,demographicorpersonalinformationisused.Businessestypicallydonotadvertisetheuseofthesemoreadvancedandpersonallyinvasivemethodsofdynamicpricing.

• Barrierstoentryexistforbusinesses,however.Similarbusinesseswilltypicallynotsufferversusacompetitor,unlessthereiscompetitionfortheinformationusedtomakeapriceoffer,itself.Smallerbusinesses,unabletocollect,analyzeand/orutilizesuchbigdata,maybedisadvantagedrelativetolargercompetitors,negativelyaffectingchoiceforconsumers.

• Opaquealgorithms,combinedwiththepotentialfordatahoarding,maybeaninvitationforabuse,intentionalorinadvertent.

|Regulatory&StandardsEfforts• Regulatoryeffortsareminimal,anddonotaddressdirectlysomeoftheconcerns

thatindividualsmayhave.• Thelegalityofsuchmethods,alongwithconsumers’variedviewsandactions

regardinguseoftheirpersonallyidentifyinginformation,makeitdifEiculttoquantifyharms,astheyvarybyindustryandindividual.

• Wherethispricingresultsfromadominantpositioninthemarketplace,the


Dynamic Pricing – Can consumers achieve the benefits they expect E

complaints-basedenforcementregimeappearslimited.• Hostjurisdictionsforonlineretailersmayoffervaryinglevelsofprivacyprotection,

giventheregulatoryvariationswiththeU.S.andEurope.• Atanindividualconsumerlevel,aharmorwrongmaybetoughtodetermine,and

suchcomplaints,eveniftheypromptinvestigations,oftenmaygounresolvedforalengthyperiodornotatall.

• Nointernationalstandard(s)existsubstantivelyaddressingdynamicpricinganditsprocesses.

RecommendaFons

|ForConsumers• Determinewhatpersonalinformationisofconcernifusedtodetermineprice

offerings.• ReadPrivacyPolicyStatementswhereriskishighofpersonalinformation

signiEicantlyaffectingprice.• Requestfrombusinessesthepersonalinformationtheyhaveaboutyou,and

consideraskingthemtoremoveit.• EnsureyouunderstandthebeneEitsyouwillobtainwhenyouprovideothers

informationaboutyourself.• Considerusingprivatebrowsingmodewhereyoudon’twantbehaviourtoaffect

yourprice.Bewarethatthenatureanddegreeofprotectionvarybybrowser.• Identifyvalidreferencepricesforcomparingprices,particularlyforsigniEicant

purchases.Takescreenshotsofpricesofferedand,ifasubsequentpricediffers,requestthebestpricefromyourpreferredsupplier.

• Ifapriceismorethanyouexpect,askhowthepriceisset.• ComplaintotheCompetitionBureauifanofferedpriceisunreasonablecomparedto

apublishedone.• Whenpurchasing,checkdifferentsitesthatprovidethesameproductorservice.• Don’tsolelyrelyonsitesthataggregateandrecommendbestprices;compare

againstreferencepricesyouestablish.• Consumersmayneedtodevelopandusesomehagglingskills,notnecessarilyan

easytask.• Takeadvantageoftraditionaldynamicpricingdiscounts,suchasage,dateor

quantity-based.Planwherepossible.

|ForBusinessDisclosure• Disclosetheuseofbigdataforindividualizedpriceoffers.


Dynamic Pricing – Can consumers achieve the benefits they expect FG

• Identifythirdpartyinformationusedinpricing• InPrivacyPolicyStatements,stateclearlywhatinformationisusedinpricing.List

third-partyorrelatedorganizationsthatmayreceiveconsumers’personalinformationforpricing.

Transac-onAc-onsandReferencePrice• Allowconsumerstoholdorreserveanofferedpriceandreturntoitonlinefor

comparisonpurposes.• Indicateareferencepricewherepossible,soconsumerscanunderstandthenature

anddegreeofbeneEit.• Indicateanyrangesthatarebasedonsupplyanddemand.

ConsumerEduca-onandInvolvement• Explainwheretechnologyenablespriceadjustmentsaccordingtosupplyand

demand.• Solicitconsumerinputonpersonalinformationcomponentsofpricing,asresearch

hasshownthatthisincreasesconsumertrust.Provideelementalcomponentsusedinthecalculations,wherepossible.

• Providenon-marketinginformationaboutthebeneEitsandcommitmentsregardingdynamicpricing.

General• Wherepricesincreasewithhigherdemand,makeeffortstoincreasesupply.• Reasonablyself-censorintermsofmaximizingpricing,intheinterestofthemutual

beneEitoflong-termcustomerrelationships.• Whereanorganizationtakesontheroleof“marketmaker”suchasanAmazon,they

shouldalsotakeontheresponsibilitiesofmarketplaceprotection—inessence,adegreeofself-regulation.

|ForRegulatorsandStandardsOrganizaFonsPrivacy• Privacyregulatorsneedtomorerigorouslyenforcetheconceptofmeaningful

consent,wherepersonalinformationisusedinpricing.• PrivacyregulatorsshouldconsideramendingthePersonalInformationProtection

andElectronicDocumentsAct(“PIPEDA”)torequireclearerindicationoftheuseofpersonalinformationinpricing,possiblyrequiringacleargridofdetailsofpersonalinformationwhenusedforpricing.

• Privacyregulatorsshouldconsideramorestructuredenforcementregime,investigatingretailersonaroutinebasis,ratherthanwhenpromptedbyacomplaint.


Dynamic Pricing – Can consumers achieve the benefits they expect FF

Compe--on• TheCompetitionBureaushouldconsideramorestructuredenforcementregime,

investigatingretailersonaroutinebasis.• Considerthemodelsofcomplianceandenforcementinothermarketplaces(e.g.,

stocksandcommodities)asmodelsforenforcement,giventhesimilaritiesintheuseofopaquealgorithms.

PricingandConsumerProtec-on• Algorithmsusedforindividualizedpricingbemaintainedforasetperiodofyearsin

auditableformandattachabletooriginaltransaction.

ConsumerEduca-on• TheOfEiceofConsumerAffairsshouldproducematerialforconsumerssuggesting

stepstheycantaketoprotectthemselves,andquestionstoask.Aswell,itcanprovideguidancetoorganizationsaboutinvolvingconsumersinpricingeducation.

• TheOfEiceofthePrivacyCommissionercanincludesuchguidanceintheplethoraofeducationalmaterialsitmakesavailable.

Standards• ISOand/orCanadianstandardsorganizationsshouldconsiderdevelopinga

DynamicPricingstandard,whichwouldprovideprinciplesandguidanceindesigning,developing,implementing,maintainingandimprovinganopenandhonestrelationshipwithconsumersforretailersusingdynamicpricing.Itcandescribe/establishbestpractices,andsetthemoutagainstanagnosticcategorizationofpractices.Thiscanassistorganizations,legislatorsandregulatorstoidentifyandremedydeEicienciesintheireffortsaroundensuringappropriatecontrolsonunconscionabledynamicpricingoutcomes.MorespeciEically,itcansetguidanceregardingthedevelopment,maintenance,auditabilityandretentionofpricingalgorithms.

Dynamic Pricing – Can consumers achieve the benefits they expect F9

IIIntroducFon

DefiniFonsForthisreportwedeEinedynamicpricingasofferingtheidentical/similarproductor

servicetodifferentcustomers(orgroupsofconsumers)atdifferentprices.Personalizedorindividualizedpricingisanarrowerformofdynamicpricingwhereinformationaboutanindividualorinferredinformationaboutanindividualisusedtodetermineapriceforaproductorserviceforanindividual.Itincludesthealgorithmicformulationofdifferentiatedpriceoffersforsingleconsumersofidentical/similarproductsorservices.ThedeEinitionofdynamicpricing,referredtoasdiscriminatorypricinginresearch

(Maxwell&Gabarino2010),isanidenticalproductsoldtodifferentconsumersatdifferent

prices.¹Wikipedia,takinganarrowerviewdeEinesitsgoalasallowingacompanytosell“goodsorservicesovertheInternettoadjustpricesontheElyinresponsetomarket

demands.”²Itisstatedsimilarlyas“wherepricesrespondtosupplyanddemandpressuresinrealtimeornear-realtime.”(Sahay2007)DictionarydeEinitionsinclude:CollinsDictionary:

“Thepracticeofofferinggoodsatapricethatchangesaccordingtothelevelofdemand,thetypeofcustomer,thestateoftheweather,etc”³

OxfordDictionary:“ThepracticeofvaryingthepriceforaproductorservicetoreElectchangingmarketconditions,inparticularthechargingofahigherpriceatatimeofgreaterdemand.”⁴

Business.com“Astrategyinwhichproductpricescontinuouslyadjust,sometimesinamatterofminutes,inresponsetoreal-timesupplyanddemand.”⁵

Bigdata,atermusedthroughoutthisreport,isdeEinedintheOxfordDictionaryas:“Extremelylargedatasetsthatmaybeanalyzedcomputationallytorevealpatterns,trends,andassociations,especiallyrelatingtohumanbehaviourandinteractions.”⁶

Personalinformationis“informationaboutanidentiEiableindividual.”⁷Theremustbeanabilitytoidentifytheindividualthroughtheinformation.Itcanincludesubjectiveinformation.AnInternetprotocol(IP)addresscanbepersonalinformationifitcanbe

tracedtoanindividual.⁸

https://www.collinsdictionary.com/dictionary/english/offering

https://www.collinsdictionary.com/dictionary/english/price

https://www.collinsdictionary.com/dictionary/english/accord

https://www.collinsdictionary.com/dictionary/english/demand

https://www.collinsdictionary.com/dictionary/english/customer

https://www.collinsdictionary.com/dictionary/english/weather

http://Business.com

Consumers Council of Canada Introduction

Dynamic Pricing – Can consumers achieve the benefits they expect F=

TheSituaFonTheuseofdifferentpricesfordifferentpeopleforthesameproductdoesnotbreakany

laws.Suchpricingislegal.TheplacementofapricestickerbyJohnWanamakerinhis

Philadelphiashopin1861⁹wasinessenceamarketsolution.Upuntilthenitwasrarethatcustomersknewthepriceofanythinguntiltheyasked.AsGabrielTardenoted,the

introductionofthepricestickerwasatruceinthewarbetweenretailersandcustomers.¹⁰Inessencethismarketsolutionbecameaviraltruce.Retailersareincreasinglyusing“bigdata”fordynamicpricing,inonlineandbricksand

mortarenvironments,increasinglyaffectingtheconsumer/sellermarketplacerelationshippervasively.Whilethereisevidenceofincreasedusageandpressureonbusinesstodoso,theoverallincreaseisdifEiculttoquantify.Thereismuchanecdotalevidencewenotethroughoutthisreport.Mostconsumers’experiencewithdynamicpricingisprimarilywiththeairlineand

hospitalityindustries,andmorerecentlywithelectricalutilitieswithlowandpeak-time

rates.¹¹Retailersarethinkingaboutandaddressingthecomplexity,opportunitiesandrisks

of“bigdata”fedalgorithmstosetpricing.Evenonlineretailers(Amazon)¹²areaddingbricksandmortarstoreswithonlinefeatureslikeconstantlychangingprices,andonlineconsumerreviews.Retailers,particularly‘bricksandmortar’,havefelttheirproEitswanewiththeInternet’s

transparencyofprices.¹³Theterm“showrooming”enteredmarketers’lexicon,todescribethebehaviourofconsumerswhovisitretailerstoexaminegoodsandthenbuyonline,often

atalowerprice,¹⁴or,inreverse,expectbricksandmortarmerchantstomatchonlinepricing.Retailersaregettingadviceandpressurefromconsultantsandthosewithaccessto

relevantsoftwareanddatatoenablethemorecomplexmethodsofdynamicpricing.“ArtsKnowledge,”anartsmarketingorganization,notesthemovementofdynamicpricing

fromtheairlinestothearts,indicatinganincreaseinseasonrevenueofupto4%,andthe

lackofpatroncomplaints.¹⁵

approachestodata:“TheDynamicPricingEngineensurescustomershaveaconsistent,fairandaccuratepriceexperienceacrosschannelsandsimpliEiespricingforsalesreps,givingthempricingthatisalignedbothtothemarketandtocorporateobjectives.”¹⁶

“Telcordiatellsitstelecomprospectsaboutthe“beneEitsandchallengesofimplementingdynamicpricinginmobilenetworksanddescribeshow,inthecontextofdynamicpricing,CSPscanleveragedataanalyticsandoptimizationtoincreaserevenueandproEits,growmarketshare,reduceCAPEX,andincreasecustomersatisfaction.”

Consumersshoponlinewithnotionsofpricetransparency.Theythink,armedwithmobiledevices,theyhaveaccesstoanyandallinformation;butthey“don’tknowwhatthey

Data sciencesoftwarecompaniespromptretailerstocombatthebarrierofoutdated


Dynamic Pricing – Can consumers achieve the benefits they expect F>

don’tknow”.MeanwhileretailersrobotizeandbringartiEicialintelligencetotheartiEiceofpriceoffers.RetailersmayEindthemselvesonacollisioncoursewithconsumers’expectationsbasedonsimplerpricesettingconventions.(e.g.supplyanddemand,‘lowestpriceisthelaw’).OneneedlooknofurtherthansomeenragedUberriderswho,accustomedtoprice

regulationoftaxifares,“accusethecompanyofrippingoffconsumerswhentheyneeda

ridethemost:duringholidays,delugesandsnowstorms.”¹⁷Howwillpersonalizedpricingbereconciledwithpublicexpectationsabouthowcommoditymarketsoperate?Consumers’experienceleadsthemtoexpectpricestobediscountedfromawidelyknown

benchmarkprice,ratherthanpricedupwardbasedonunknownbase/referenceprices.Manyreactnegativelytofrequentorreal-timeincreasesresultingfromdemand-baseddynamicpricing,demonstratingtwokeyissues:(1)consumerawarenessofdynamicpricingisweakforotherthantraditionalmethods;and(2)thepotentialbeneEitsandriskstoabusinesspricingdynamically.ConsumersfacingdifEicultiesincomparisonshoppingmayfeelfrustrationincreasewiththefrequencyofexperiencingmissedopportunities.Bigdataandconsumer-basedtechnologyapplications,particularlyonmobile,are

combiningtodisruptindustriesandeconomicsectors.Givenconsumer’sdesireorinfatuationwithdynamicpricing,particularlybasedonexperiencesofitsolelyasdiscounting,andtheinterestofbusinessesinavoidingpricetransparencytousetheresultingmarketplaceinefEiciencytocreateproEits,thereisamplereasontoexpectaclashofintereststoemerge.ConsumersexpectafreemarkettoevermoreefEicientlyservetheirinterests,andthathasbeenapromiseofcapitalisteconomictheorypremisedoncompetition.Consumershavegrownaccustomedtotheideathattheinvisiblehandofthe

freemarketmaygiveortakeaway,butwilltheyfeelthesameaboutthehandofaWatson¹⁸oritsheirs.Couldthispricewarbecomeevenmoreonesided?Andjusthowcapablemightamachinepricenegotiatorbecome.Somemustthink‘pretty

capable’,giventheplethoraofretailandmarketingconsultingorganizationsencouragingbusinessestotakeadvantageofdynamicpricing.SuchapricingenvironmentwillbeincreasinglydifEiculttoregulatebasedoncurrentmethodsofsurveillanceandenforcement.Theriskofmischiefbybusinessesishigh.Consumerawarenessofthechangesconcerningpriceoffersislowandtheirself-conEidenceasshoppers,inthefaceofthis,ismisguided–abadcombinationforthem.

FactorsthatLedConsumersCouncilofCanadatoConductthisResearchAlistoffactorsledtheCounciltoconductthisresearch,including:• CommentsattheCouncil’sNovember2015InTouchwitheConsumerProtection

conference.Keynotespeaker,DougStephens,aCanadianexpertonthefutureofCanadianretail,highlightedthegrowinguse,andbeneEitstoconsumers,ofbigdatainprovidingpersonalizeddynamicpricing.Participantsclearlynoted


Dynamic Pricing – Can consumers achieve the benefits they expect F?

concerns.Dr.DilipSoman,abehaviouraleconomistandprofessoratUniversityofToronto’sRotmanSchoolofManagement,notedtheoverconEidenceofconsumerswithsmartphones,whichmayresultinpoorpurchasedecisions.MichaelJenkin,formerlydirectoroftheOfEiceofConsumerAffairsandChairoftheOECDCommitteeonConsumerPolicy,notedthelackofefforttoofferconsumersclearinformationnecessaryforthemtomakeproperdecisions.

• Mediaandanecdotalevidenceofuseofpersonalinformationinsettingprices.Forinstance,inapracticenowdiscontinued,Amazonwoulddisplaydifferentpricestoconsumerssimultaneously,basedontheirviewofwhatthemarketwouldbear.SometravelsiteswoulddirectAppleuserstothemoreexpensive“aisle”,leavingthePCtothemorepedestrian.Anotherbasedpricingonconsumers’proximitytocompetitors.

• Mediapublicitysuchasaroundtheactionsofwebsitesthattrackcookiesandchargemoretorepeatvisitors.Althoughitisimportanttonotethattheuseofcookiesisnotalwaystothedisadvantageoftheconsumer.

• Lackofconsumerknowledgeofretailpricingpracticesotherthanthroughreferencepricesanddiscounting.

• AlackofCanadianguidanceonreconciliationofapproachesofalgorithmicpricingpracticestotherequirementsofconsumerprotectionandcompetitionlawandregulationconcerningadvertisedpriceoffers.

• Theriseoftheuseofdynamicpricingbyproviders/intermediariesin‘sharingeconomy’marketplaces,whichdemonstratemanyofthefeaturesofbrokerage.

• Theincreasedandspontaneoususeofmobiledevicestoresearchdecidepurchases.• Theriskofsomeconsumersemergingasmorevulnerableinthemarketplaceby

virtueoflackofaccesstodynamicallyofferedprices.

TheConsumerInterestThisresearchgivesconsumers,consumerprotectiongroups,business,andregulatory

authoritiesinformationtoassistthemin:• IncreasingconsumerandbusinessconEidenceandtrust,anddecreasingbad

behaviour,inthemarketplace.• Settinggroundworkforbetterbusinessprocesses.• Educatingconsumers.• Consideringactionstowardregulationorguidanceonconsumerprotection.Businessesrequireguidanceinthisarea.Provincialgovernmentsarelookingatdynamicpricingasanareaofconcern.Thishas

beenatopicofinterestfortheOntarioMinistryofGovernmentandConsumerServices(OMGCS),forexample.Purchasingdecisionsbasedon‘unfairly’opaquepricingmodelsmaycontributetoan


Dynamic Pricing – Can consumers achieve the benefits they expect F@

inefEicient,less-productivemarketplace.ThesoonerinefEicienciesandfrictioncausedbyinappropriateuseofdynamicpricingareaddressedsystemically,thebetter.Thisresearchproject’skeyoutcomes,setoutasaConsumerProtectionFramework,

involvetheidentiEicationofpossibleharmstoconsumersifpricingpracticesareexploitative;whatconsumerscandotoprotectthemselves;andwhatbusinessandregulatorsandstandardsorganizationscandotoincreaseconsumerprotection.

KeyQuesFonsListThisresearchseekstoanswerthesequestions:• Whatarethefundamentaltypesofdynamicpricing?• Whataretheprimaryreasonsfordynamicpricing?• What,inthecontextofconsumerrights,areareasofpotentialharmorconcern

forconsumers?• Whataretheresponsibilitiesofconsumersinmitigatingandmanagingthese

potentialharms?• WhatisconsumerawarenessaroundthebeneEitsandrisks?• Whatarethebarriersandissuesfacingbusinessthatcausethemtofailto

protectconsumersrights?• Wheremaybusinessexploit,intentionallyorotherwise,consumers?• Whatcanconsumersdotoprotecttheirrights?• Whatcanbusinessesdotoensuretherightsofconsumers?• Whatcanregulatorsdotoensuretherightsofconsumers?

Dynamic Pricing – Can consumers achieve the benefits they expect FC

IIIMethodologicalOverview

EnvironmentalScan&LiteratureReviewAliteraturereviewwasconductedtohelpdeEinethescopeanddevelopafuller

picture,frommultipleperspectives,oftheissuessurroundingdynamicpricing,anditsmethods,bestpractices,rationaleandregulatoryenvironment.Publishedreports,researchpapers,consultants’websites,Internetsources,andmediawereexamined.Abroadbackgroundandviewoftheenvironment,drivers,issues,andindustryplayerswasdeveloped.ThisyieldedinformationaroundharmsandbeneEitsofdynamicpricing,practicesand

rationale,regulatorybackground,barrierstobusiness,andbestpracticesinformation.ThishelpedguidethedevelopmentoftwoPublicInterestNetworkquestionnaires,thefocusgroupdiscussionguide,theonlinesurveyquestionsandthekeyinformantinterviewguide.Theliteraturereviewprovidedcontexttounderpinthisreport’srecommendationsabout

howconsumerscanhelpthemselves,andhowbusiness,regulators,andstandardsorganizationscanassistinprotectingconsumersrights.Itdoesnotopineonthesoundnessofmethodologiesofthevariousresearchpapersin

ourreview,acceptingandcitingtheirEindingsandrecommendationsasclaimed.

PublicInterestNetworkQuesFonnaireTheConsumersCouncilofCanada’sPublicInterestNetwork(PIN)wasconsultedinthe

initialandEinalstagesofthisresearch.TheEirstquestionnairewastoidentifyissuestobeexploredandprovideinputtothedevelopmentofthefocusgroupdiscussionguide,keyinformantquestioning,andonlinesurveyquestions.Thesecondwastoobtainviewsonpotentialsolutions.ThePINcomprisesthoughtful,knowledgeable,interestedandengagedCanadian

consumers.Participantsvoluntarilyself-select,registeringtheirinterestthroughtheCouncil’swebsite.Theyarefrequentlyactiveatthecommunitylevel;awareoforespeciallyinterestedinconsumerandpublicpolicyissues;ofteninvolvedandhavesometimesbeeninEluentialintheircommunitiesofinterest;andaremorewillingthanmosttoexpressopinionsandtakeastand.

Consumers Council of Canada Methodological Overview

Dynamic Pricing – Can consumers achieve the benefits they expect FD

TheCouncilconsiderstheviewsofPINmembersbasedonthiscontext,anddoesnottreattheirviewsasstatisticallyrepresentative.ParticipantsmaybemoreeducatedwithhigherincomesthanthegeneralCanadianpopulation.Asactive,aware,criticalandinformedconsumers,PINparticipantsmayofferinsightsintoissuesandcurrentandemergingtrends.TheCouncilconsidersconsultingPINmembersusefulforidentifyingandassessingconsumerprotectionproblemsandpotentialsolutions.Theinitialquestionnaireconsistedofnineopen-endedquestions.134respondents

openedthesurveyand28completedtheEirstquestionnaire.Thesecondquestionnaireconsistedofthreeopen-endedquestions,openedby151respondents,24ofwhomcompletedit.Thislevelofresponseiscommon,asPINparticipantsoftenself-qualifythemselvesforparticipationbasedontheirinterestortheirownconEidenceinbeingableto

offerusefulviews.¹⁹

DetailsofeachquestionnaireandnotableextractedquotationsareincludedinAppendixI.

FocusGroupsWeconductedfocusgroupstoobtaininsightsintoconsumerperceptions,awareness

andbehaviourregardingdynamicpricing,theirunderstandingbetweenthemoreovertandcoverttypes,andtheirconcernsabouttheirsigniEicanceandnature.Participationandinteractioninagroupsettingprovidesinformationasparticipantsmakeconnectionswithothersandtheircomments.Keytofocusgroupsisunderstandingparticipants’reactionsandtheirlearning.ConsumersinTorontoandMontrealwereaskedtoparticipateinfocusgroupstoprovide

viewsondynamicpricingheldonJanuary12and14,2017inTorontoandMontrealwiththeassistanceofResearchHouseandEnvironics.Participantswereselectedbytelephoneconsideringtheirexperienceinonlineshoppingandwerescreenedtoachieveagender,incomeandagemix.ThetwoTorontogroupswereconductedinEnglish.InMontrealonewasconductedinEnglishandoneinFrench.Atotalof24participants(12inTorontoand12inMontreal)wereaskedabouttheirlevelsofawarenessofdynamicpricingmethodsandtheirconcerns,focusingonhowtoimproveconsumerprotectionthroughactionsofconsumers,businessandgovernment.Theresultsprovidedinputintoquestionstobeaskedintheonlinesurvey,and

discussionswithsomeofthekeyinformantsregardingconsumerattitudes,andultimatelyasinputintoourrecommendations.TheSelectionScreener,DiscussionGuideandparticipantdetailsareincludedinAppendix

II.

OnlineConsumerSurveyAnonlinesurveyof600Canadians,generallyreElectingCanada’spopulationbyage,


Dynamic Pricing – Can consumers achieve the benefits they expect FE

genderandregion,wasusedtoassessthedegreetowhichconsumersassessedthefairnessof10dynamicpricingpractices,frompracticestheytypicallyknowandacceptthroughtonewerbig-dataanddemographics-basedpricingmethodologies,oftenemployedwithouttheknowledgeofconsumers.Onlinesurveyscanproduceveryaccurateresults,convenientlyprovidedbyconsumers

andoftenwithmorehonestresultsthanspeakingdirectlytoamarketresearcheronthetelephone.Aswell,morepeoplefromabroaderrepresentationcanhelpincomparingandcontrastingresults.Itprovidesgreateraccesstothoseusingmobiledevices.Theonlinesurveytoolusedmakesuseoftheinferreddemographicandlocation

informationtoemploystratiEiedsampling.Demographicsareinferredfromalargedatasetofrespondents’browserhistoryforage,genderandgeography,andmatchedagainstexistinggovernmentstatisticaldata.Inoursample,60%ofrespondentsweremale,40%female.However,biaswasremovedusingpost-stratiEicationweighting.Thisresultstypicallyinalowerrootmeansquareerror,andweightadjustedaccordingly.Everyeffortwasmadetokeepthequestionsunbiased.Basedontheresultsofthefocus

groups,andthePINquestionnaire,thequestionsweregrouped,unknowntotheparticipants,intothreedynamicpricinggroups:(1)traditional;(2)technologyenabledsupplyanddemand;and,(3)demographic,behaviouralandpersonalinformationenabled.Thesegroupingsformedthebasisforfurtheranalysisastheyindicatethechangingnatureofdynamicpricingovertime,andcomprisedistinguishablegroupsfromaconsumerperspective.The10-pointscaleusedtocollectresponseswasarankingof‘fairness’,fromstrongly

agreetostronglydisagree.Allexampleswerebasedonrealpractices.Thesurveyanalysistreatsarankingofone,two,orthreeasclearconvictionapracticeisunfair,four,Eive,six,andsevenindicateneutralityorambivalence,andeight,nineor10indicateapracticeisfair.Theorderofthequestionsdidnotindicatethecategories,whichare:• Traditional:

⁃ Senior’sdiscount

⁃ Volumediscount

⁃ Loyaltyprogram• TechnologyEnabledSupply&Demand:

⁃ Amazon

⁃ MajorLeagueBaseball

⁃ StubHub

⁃ UberSurgePricing• Demographic,BehaviouralandPersonalInformationenabled:

⁃ Luxuryandbudgethotelwebsites


Dynamic Pricing – Can consumers achieve the benefits they expect 9G

⁃ Travelsitecookiebasedpricing

⁃ Personalizedpricing,basedon‘willingnesstopay’

Thedetailedquestions,detailregardingparticipantsbyquestion,andchartedresultsareincludedinAppendixIII.

KeyInformantInterviewsWeconductedkeyinformantinterviewstoobtaindiverseperspectives,expertiseand

insightsintotheresearchquestions.Elevenkeyinformantswereselectedfromacademia,retail,regulatory,sharingeconomyorganizations,privacyexperts,andconsumeradvocates.Theyhadavariedandbroadmixofknowledgeandexperienceintheareasofprivacy,

consumerissues,retail,theneweconomies(particularlythesharingeconomy),regulatorymatters,consumerissues,marketingand/orpricing.Thediscussionswerebasedonabroadsetofquestions,althoughnoteachkeyinformantwasaskedeveryquestion.Keyareasofquestionsaddressed:• Dynamicpricingrationaleandmethods• BeneEits• Harms• Consumerawareness• Howconsumerscanprotectthemselves• Businessbarriers• HowbusinessandregulatorscanprotectconsumersTheinterviewsweretocollectevidenceandinsightsregardingconsumerrisksand

protections,andthoughtsaboutoptionsforrecommendationstobusiness,governmentandconsumers.Thefocusoftheinterviewsfortheresearchwastoensuremultipleandfairperspectivesonthesubjectmatter.Onepersonconductedallinterviews.TheInterviewGuidewasdevelopedbasedontheresearchquestionsandinformationgatheredfromtheinitialPIN.SeeAppendixIVfordetailsonindividualKeyInformants,andthedetailedKeyInformant

InterviewGuide.

ConsumerProtecFonFrameworkTheresearchwasdirectedtowardthedevelopmentofaConsumerProtection

Framework.Itincludesrecommendations,presentedassetsofsimplematrices,addressingconsumers,businesses,andregulatoryandstandardsbodies.In1962,JohnF.Kennedy,inalandmarkspeech,outlinedfourrightsofconsumers.These

were:• Therighttosafety


Dynamic Pricing – Can consumers achieve the benefits they expect 9F

• Therighttobeinformed• Therighttochoose• TherighttobeheardIn1985,theUnitedNations,throughtheUnitedNationsGuidelinesforConsumer

Protection,expandedthesetoeightbasicrights,whichwiththerighttoprivacyformthebasisfortheConsumersCouncilofCanada’sfocusontherightsandresponsibilitiesofconsumers.ResearchbytheCounciladdressestheseninebasicrights,addingourviewofa

consumer’sresponsibilities,inthelistbelow.Insummary,sixoftheeightinitialrightswererelevanttothisresearch,aswastherighttoprivacy.TheEindingsofthisresearchaddresseachofthesesix,andprivacy.Allrightsareasarepotentiallybetteredformostconsumersbyincreasedawarenessandtransparencyofdynamicpricing.

SafetyTherighttobeprotectedagainstgoodsorservicesthatarehazardoustohealthandlife.Theresponsibilitytoreadinstructionsandtakeprecautions.Totakeactiontochoosesafetyequipment,useproductsasinstructedandteachsafetytochildren

InformationTherighttobegiventhefactsneededtomakeaninformedchoice,tobeprotectedagainstmisleadingadvertisingorlabelling.Theresponsibilitytosearchoutanduseavailableinformation.Totakeactiontoreadandfollowlabelsandresearchbeforepurchase.

ChoiceTherighttochooseproductsandservicesatcompetitivepriceswithanassuranceofsatisfactoryquality.Theresponsibilitytomakeinformedandresponsiblechoices.Totakeactiontoresisthigh-pressuresalesandtocomparison-shop.

RepresentationTherighttoexpressconsumerinterestsinthemakingofdecisions.Theresponsibilitytomakeopinionsknown.TotakeactiontojoinanassociationsuchastheConsumersCounciltomakeyourvoiceheardandtoencourageotherstoparticipate.

RedressTherighttobecompensatedformisrepresentation,shoddygoodsorunsatisfactoryservices.TheresponsibilitytoEightforthequalitythatshouldbeprovided.Takeactionbycomplainingeffectivelyandrefusingtoacceptshoddyworkmanship.

ConsumerEducationTherighttoacquiretheknowledgeandskillsnecessarytobeaninformedconsumer.Theresponsibilitytotakeadvantageofconsumereducationopportunities.Takeactionbyattendingseminarsandworkshops,worktoensureconsumereducationtakesplaceinschools.

HealthyEnvironmentTherighttoliveandworkinanenvironmentthatisneitherthreateningordangerousandwhichpermitsalifeofdignityandwell-being.Theresponsibilitytominimizeenvironmentaldamagethroughcarefulchoiceanduseofconsumergoodsandservices.Takeactiontoreducewaste,toreuseproductswherepossibleandtorecyclewhenpossible.

PrivacyTherighttoprivacyparticularlyasitappliestopersonalinformation.Theresponsibilitytoknowhowinformationwillbeusedandtodivulgepersonalinformationwhenappropriate.

Dynamic Pricing – Can consumers achieve the benefits they expect 99

IVResearch

FindingsfromtheEnvironmentalScanandLiteratureReview

|e-CommerceisBothDrivingandRedefiningCommerceInCanadaPost’s2017whitepaper,Growinge-CommerceinCanada,itnotesthatonline

shoppersaredrivingtheevolutionandgrowthofcommerce.Thesurveyof5,000onlineshoppersinCanadafoundthefollowing:• 39%ofonlineshoppersmademorethanhalfoftheirpurchasesonline,andmore

thanathirdplantoincreasetheironlinepurchasingnextyear.• Hypershoppersarecriticaltobothgrowthoftheindustryandindividual

businesses.• Consumerswantabetterexperienceshoppingonline.

• Millennials²⁰andtheirneedsarediverseandcomplex.

• Gen-Xers²¹havesigniEicantfundsandcannotbeignored.²²

Roughlyeightin10Americansareonlineshoppers.15%buyonlineweekly.Thoseunder

50,increasinglybuyandresearchonline.²³

|DynamicPricingisNothingNew(orisit?)Itisgenerallyaccepted²⁴thatthepricestickercameintobeingin1861whenJohn

WanamakerplacedoneonaproductinhisOakHillstorenearPhiladelphia.²⁵

Untilthen,priceswereindividuallynegotiatedorhaggled.InsomewaystheIndustrialRevolutionbroughtthepricesticker.InthekeynotespeechattheConsumersCouncilofCanada’sNovember2015conference

InTouchwitheConsumerProtection,DougStephensnoted,tothesurpriseoftheaudience:“Dynamicpricingiscoming,althoughit’snotreallynew”.²⁷Productsarebecomingpricedbytimeofdayorcustomerloyaltyorwhatelseisintheconsumer’sshoppingcart.

“TheconsumerwillbeofferedapricespeciEictothem.”²⁸Henotedthepropositionthat

AspointedoutbyMichaelDavisinhisGabrielTardeOnCommunicationandSocialIn5luence:SelectedPapers,thenineteenthcenturyFrenchsociologistGabrielTardenotedifthemarketplaceiswarbetweenbusinessandconsumers,thenthepricesticker isatruce.²⁶

Consumers Council of Canada Research

Dynamic Pricing – Can consumers achieve the benefits they expect 9=

“thepricepaidforsomethingwillbebasedonshoppinghabitsandloyalty.”²⁹Hesaiditisfairertoconsumers,anditisreallythestickerpriceusedtodayinbricksandmortarretailthatisnewinhumanhistory,notdynamicpricing.

|ClassicalPriceDiscriminaFonInonedeEinitionpricediscriminationiswhereaproductorserviceissoldtodifferent

peopleatdifferentpriceswithaviewtocollectingthemaximumamountaconsumeris

willingtopay.³⁰

Pricediscrimination,inthreedegrees,occurswhentwoormoreproducts,orservices,similarinnature,withthesamemarginalcostaresoldtodifferentpeopleatdifferentprices.AllthreeofthesedeEinitionsofpricediscriminationincludeexamplesofwhatisconsidereddynamicpricing.First-degreepricediscriminationinvolvessettingpricesatthemaximumaconsumeris

willingtopay.OECDnotesthatuntiltheadventofbigdatathishasbeenlargelya

“theoreticalconcept”andthatthroughtheuseofbigdataitwillbe“betterapproximated”.³¹

Second-degreepricediscriminationallowsachoicebyaconsumer—differentpricesfordifferentversionsofaproduct.Airlinetravelprovidesfamiliarexamples,asdoautomobiledealersandcomputerretailersofferingessentiallythesameproductwithvaryingoptions.Third-degreediscriminationispricesettingonobservabledifferences,oftentemporary,

asintimeofdayorweek³²,orpermanent,asinage.Airlineticketpricingmethodologyoftenfallsintothiscategoryaswell.Pricediscriminationdoesnothappeninavacuum.Itrequiresseveralfactors,including:• Thesellermustbeabletoidentifyseparatemarketsegmentswithdifferingprice

elasticitiesandseparatedbytime,spaceorthemanner/nature/conditionofuse.• Therecannotbeseepagebetweenthemarketswherea“lowprice”consumercan

purchaseandreselltoa“highprice”consumer.

• Thesellermaintainssomedegreeofmonopolypower.³³

Whatisgenerallyconsidereddynamicpricingispricediscrimination.Itdoesnotmakeitillegal.Suchdynamicpricing,evidenceofwhichisemerging,isallowedsubjecttoregulation.Ifitisnotsoldabovetheadvertisedprice,notfalseormisleadingordinarysellingpricerepresentationsandnotbaitandswitchsellingitdoesnotbreachCanadianCompetitionlegislation.Ifproperdisclosure,consentandhandlingregulationsaremetunderPIPEDAitisnotinbreachofprivacyregulation.Ifpricingisnotbasedonraceorethnicoriginitdoesnotbreachhumanrightsdiscriminationlegislation,althoughthirddegreepricediscriminationmethodsbasedonagearenotcontested.IntheUnitedStatespricediscriminationisillegalwherepricediscrimination,ordynamic

pricing,effects“maybesubstantiallytolessencompetitionortendtocreateamonopoly.”³⁴WeissandMehrotra(2001)concludethatgiventhelackofattentiongivensuchbehaviour


Dynamic Pricing – Can consumers achieve the benefits they expect 9>

becauseofthebaseintentoftheRobinson-PatmanActbeingtocurtailanti-trustbehaviour:“Itismorelikelythatthelargenumberofcompetitors(aswellastheincreasingprevalenceofpricecomparisonWebsitesandshoppingbots)willactasacurbonpossibleprice

discrimination.”³⁵

|PriceTransparencyvs.PricingTransparencyPricetransparency–consumer’sabilitytoviewprices–ontheInternetisnow

widespread.SiteslikeTrivago,Kayak,amongothers,“allowconsumerstodiscoverand

comparethepricesofsimilarproductsacrossmultipleoptions.”³⁶Intheirresearch(RossiandChintagunta2015)concludedthatgaspricesdroppedby1centperlitrewithmandatorypriceposting–20%ofaretailer’smargin.Pricetransparencycanbecostlytoaretailer,beneEicialtoconsumers.PricingtransparencyislessdeEinedandlessoftenreferredtointheliterature,deEinedas

transparencyofthepricingprocess,nottheEinalprice.Fewcompaniesofferboth.Amazondemonstratespricetransparencywithitsclearprice

offertoaconsumer,butitspricingmethodremainsunknown.Furthermore,aconsumerdoesnotknowthedurabilityoftheprice–thelengthoftimeitwillbeavailable.BusinessesfearthatgreaterpricetransparencyleadstoproEitloss.They’vebattledthe

Internet’scontributiontogreaterpricetransparencyandvalidpricecomparison.‘Showrooming’,whereastoremaybeusedasashowroombyconsumerswhothenmaybuyfromalower-pricedseller,particularlyonline,hasconcernedbricksandmortarretailers,particularlywiththeadventofconvenientmobiledevices.Consumerschecka

productinstorethenobtainreferencepricingconcurrently.³⁷Also,consumerspriceshoponlinebutwalkintostoresseekingpricematching,particularlyfromthosewithpubliclystatedpricepolicies.Theretailermadethesale,butmustmatchthepriceofalowcostonlineretailer

|MarketplaceFactorstoConsiderBigData,ItsPromise,andPerilsTheriseofbigdatahasprecipitatedconsiderableresearch,outliningitscapabilityto

supportvariedandsigniEicantdynamicpricing,anditsbeneEitsandharms.Forexample“Insurerscannolongerignorethepromisethatthealgorithmsdrivingbig

datawilloffergreaterpredictiveaccuracythantraditionalstatisticalanalysisalone.”(Swedloff,2014).AconcernidentiEiedisthatitsuse“couldleadtoinefEicientsocialandprivateinvestments,undermineriskspreadinggoalsofinsurance,andinvadepolicyholderprivacy.”Concernsincludeprivacyinvasions“unanticipatedbyregulators”.Itspredictivepowerisallowingorganizationstodeterminepersonalinformationwithout

requestingit.³⁸


Dynamic Pricing – Can consumers achieve the benefits they expect 9?

“BigDataharboursthepotentialforbothgreatersocietalinequalityandforgreaterequality.”(Hacker,2016).“OneofthestrikingcharacteristicsoftheeraofBigDataistheabilitytouncovercounterintuitivecorrelations.Therefore,itisnowpossibletodifferentiateseeminglyneutralcharacteristicsthat,whileunnoticedbythegeneralpublic,correlatewith

discriminatorytraits.”³⁹ThisintroductoryparagraphoftheOfEiceofthePresidentoftheUnitedStatesreportBig

DataandDifferentialPricing,February2015,(afollow-uptoits2014reportBigData:SeizingOpportunities,PreservingValues)notesthepotentialharm:

Inthemarketingcontext,bigdatareferstotheabilitytogatherlargevolumesofdata,oftenfrommultiplesources,anduseittoproducenewkindsofobservations,measurementsandpredictionsaboutindividualcustomers.Muchofwhatcompanieslearnthroughbigdataisusedtodesignproductsandservicesthatdelivermorevaluetotheindividualconsumer.Atthesametime,ifsellerscanaccuratelypredictwhatacustomeriswillingtopay,theymaysetpricessoastocapturemuchofthevalueinagiventransaction,especiallywhentheyfacelittlecompetition.

Andinthe2014report:Unfortunately,“perfectpersonalization”alsoleavesroomforsubtleandnot-so-subtleformsofdiscriminationinpricing,services,andopportunities..

EconomicsofPrivacyandPricingPersonaliza-onOpposingviewsexistintheliteratureaboutthebeneEitstotheeconomyofthefull

applicationofpricediscriminationinmarkets.Oneperspectiveclaimsit’spositive,onetheopposite,andanotheruncertain.ResearchhasfoundthebeneEitstobuyersversussellers,wheresellersofferdynamicallyachieveddifferentialpricingbasedonbuyerbehaviour,hasvariedbutgenerallyhasbeentothebeneEitofsellers.Thisresearchhasrelatedprimarilytotheeconomicadvantagesbusinesseshavefrominformationasymmetriestheycancreate.Researchfocusedontheeconomicvalueandconsequencesofprotectinganddisclosing

personalinformation,andonconsumers’understandinganddecisionsregardingthetrade-offsassociatedwiththeprivacyandthesharingofpersonaldata,identiEiedthreeideasthat“connectdiverseinsightsfromtheliterature”(Acquisti2016):

• Characterizingasingleunifyingeconomictheoryofprivacyishard,becauseprivacyissuesofeconomicrelevanceariseinwidelydiversecontexts.

• Therearetheoreticalandempiricalsituationswheretheprotectionofprivacycanbothenhance,anddetractfrom,individualandsocietalwelfare.

• Indigitaleconomies,consumers’abilitytomakeinformeddecisionsabouttheirprivacyisseverelyhindered,becauseconsumersareofteninapositionofimperfectorasymmetricinformationregardingwhentheirdataiscollected,forwhatpurposes,andwithwhatconsequences.

Inresearchonprivacy,economicsandpricediscriminationontheInternetOdlyzko(2003)foundthatthethenrapiderosionofprivacywasduetothe“increasingimportanceofpricediscrimination.”AndtheInternet“offersnotonlythepossibilityofunprecedented

privacy,butalsoofunprecedentedlossofprivacy,andsofarprivacyhasbeenlosing.”⁴⁰Intrusionsonprivacy,itwassaid,allowssellersto“determinebuyer’swillingnesstopay.”Theyalsonotedthatpricediscrimination“isusuallyregardedasdesirable,sinceitoften


Dynamic Pricing – Can consumers achieve the benefits they expect 9@

increasestheefEiciencyoftheeconomy.”⁴¹Theyclearlystatedthelackofaneasyresolution.Theysuggestedoneoutcomewouldbeincreasedactivitiestoobfuscatepricediscrimination,includingbundling,micro-paymentsandauctions.Inanalyzingtheeconomicsofprivacyandpersonaldata,Acquisticoncluded:“Itwouldbe

futiletoattemptcomparingtheaggregatevaluesofpersonaldataandprivacyprotection,insearchofa‘Einal’,deEinitive,andall-encompassingeconomicassessmentofwhetherweneedmore,orless,privacyprotection.”Acquisti(2010)notedprivacydeEinitionsaretoovariedandthevaluetrade-offsdiverseandconsumersvaluationsaretoonuanced,andsuggestedaneconomicperspectivecanaidindeterminingthebalancebetween“informationsharingandinformationhiding”andisinthebestinterestofconsumersaswellassocietyasawhole.Theevidenceindicatesmucheducation,awareness,privacyenhancingtechnologies,andsolutionscontrolledbyusersisnecessary,butthatthesealonewillbeinsufEicientforaproperprivacybalance.Hesuggestedaregulatoryframeworkwhere“economicscouldhighlightdifferenttrade-offs,technologycouldhelpachievemoredesirableequilibria,andregulatoryinterventioncouldnudgethemarkettoadoptthosetechnologies.”Hefurthersuggestedthattheburdenofproofofquantifyingdamageneednotbeleftwiththeconsumer;butwiththedataholders,“whomayberequestedtodemonstratewhytheycannotefEicientlykeepprovidingthesameproductsandservicesin

mannersthataremoreprotectiveofindividualprivacy”.⁴²

InresearchingAppleiTunespricing,ShillerandWaldfogel(2011)foundthattheproEitpotentialforpersonalizedpricingissigniEicant,butthatallnecessaryinformationmaynotbeavailableorenough,asyet.“Bundling,nonlinearpricing,andthird-degreepricediscrimination]cannotextractmorethanaboutathirdofsurplusasproEits.Personalized

pricingcanintheoryextractallsurplus.”⁴³

Fuelledbyspeculationofpricediscriminationincommercebasedonpersonalinformationinvoluntarilyleftonlinebyconsumers,researchersusedcrowdsourcingtoEind“demonstratedinstancesofproductswhosepricesvariedonlinedependingonthelocationandthecharacteristicsofprospectiveonlinebuyers.”(Mikiansetal2013)“Thereexist

severalretailersthatreturnpricesforthesameproductthatvaryby10%-30%”.⁴⁴

Acquisti(2015)found“Thetaskofnavigatingthoseboundaries,andtheconsequencesofmismanagingthem,havegrownincreasinglycomplexandfatefulintheinformationage,tothepointthatournaturalinstinctsseemnotnearlyadequate.”HedeEinedthethemesinorganizinghisconclusions.Uncertaintyandcontext-dependenceresultedinpeoplewhocan’tbereliedupontoworkthecomplextrade-offsofprivacyintheirowninterest.TheinEluenceoforganizationswithaclearinterestinusingsuchprivacycanplayonthemalleabilityofprivacypreferencesinwaysthatcan“suppressprivacyconcerns"andthereforeaffectconsumerbehaviour.Heconcludedfromareviewoftheresearchthatifthegoalofpublicpolicywastoprotecttheprivacyofindividuals,thendisclosureandprovided


Dynamic Pricing – Can consumers achieve the benefits they expect 9C

informationwouldbeinsufEicient.“Peopleneedassistanceandevenprotectiontoaidin

navigatingwhatisotherwiseaveryunevenplayingEield.”⁴⁵

Onthehypothesisthat“fundamentalchangeinthewaygoodsarepricedisunderway”,Shillerfoundthat“web-browsingdata,…–variableswhichreElectbehavior”dosubstantiallybetterthandemographicdatainpersonalizingprices.(Shiller,2014)ItwasfoundthatdemographicscanincreaseproEitsby0.8%,whereasusingwebbrowsingdatatotailorpricescanimproveproEitsbymorethan12%.Insomecasesthepriceschargedtoonecustomerweredoublethosechargedtoothers.Itstatedthat,ifpersonalizedpricingisused,theoveralleffectsmaybe:• TheincreasedproEitstomonopoliesmayincrease“theincentivestoinnovateand

differentiate.”• AsigniEicantimpactonprivacylaws.• Consumersmaywasteeffortsmaskingthemselvesinanefforttobelowvaluation

consumers.“Arelatedquestioniswhetheritisfairforconsumerstopaydifferentpricesforthesame

product.Thereisnoobjectiveanswer,butthereappearstobeapublicnear-consensus.Kahnemanetal(1986)Eindpersonalizedpricingwasviewedasunfairby91%of

respondents.”⁴⁶

Notingthatpersonalizedpricingisnotoftenevidenced,butoftendiscussed,JoelWaldfogelinvestigatedtheeffectofpricingoftuitionfeesbasedonobservables.Hefoundthatrevenueincreasedby2.2%overuniformpricingwithjustonevariableandupto9.0%

wheretailoringwasbasedonallobservables.⁴⁷(Waldfogel2015)InresearchtodetermineeffectsofpricediscriminationwhencompetingEirmscanuse

personalinformationandconsumerscanoptoutforaprice,Montesetal(2015)showthatundercompetition“theoptimalsellingstrategyfortheownerofconsumerdataconsistsindealingexclusivelywithoneEirminordertocreatemaximalcompetitionbetweenthewinnerandtheloserofdata.ThisbringsinefEiciencies,andweshowthatpolicymakersshouldconcentratetheirattentiononexclusivitydealsratherthanmakingiteasierfor

consumerstoprotecttheirprivacy.”⁴⁸Theyarguefornomonopoliesondataandthatithasconsiderablevalue.Furthermore,“inthemonopolycase,makingiteasierforconsumersto

protecttheirprivacyhasanambiguouseffect:someconsumersgainwhileotherslose.”⁴⁹

StevensonandPasek(2015)investigatedtherelationshipbetweenanindividual’spreferenceforpersonalizationandtheironlineprivacyconcern,theirInternetuseandthetrusttheyplacedinInternetEirms.Theyfoundthatprivacyconcerns“donotappeartodiminishsupportforpersonalization.”ConsumerspreferpersonalizationmorewhenthepersonalizationseemspersonallybeneEicialandlesswhenthebeneEitsarevague.WhenconsumerstrustsitesandusetheInternetheavily,theyperceivemorebeneEitfrom

personalization.⁵⁰


Dynamic Pricing – Can consumers achieve the benefits they expect 9D

Onthehypothesisthatconsumergroupspreferandrecommendopt-inoropt-outpolicies,thatthevoluntaryparticipationisthe"favouredcompromise”,Kohetal(2015)comparedvoluntaryproEilingtonoproEiling,Eindingcounterintuitivelythat“neithersocialwelfarenoraggregateconsumersurplusisnecessarilyhigherundervoluntarilyproEiling,andthatwheresocialwelfaremaybeincreased,itmaycomeattheexpenseofconsumersurplus.”Plourde(2015)foundthatconsumers“weresurprisedattheextentofthecollectionand

useoftheirpersonalinformation”,inthiscaseforonlinebehaviouraladvertising(notpricing).Theyalsowantedtobeinformedparticularlywithin“theirsphereofPrivacy”,andthat,contrarytowhatsellers/providersbelievedtobeanarrowviewofpersonalinformation,whatwasgatheredwaspersonalinformationandsubjecttoPIPEDAregulation.;and,giventheextentofsuchcollectionanduseandtheweaknessofopting-outmechanisms,itisdoubtfulthattheconsentobtainedfromconsumerscouldeverbetruly

informed.⁵¹

Theyrecommendedguidelinesbeadaptedtodesignatecertaincategoriesofpersonalinformationassensitive,andthatmechanismsbeimplementedtoenableinformed

consent.⁵²

Shiller(2016)foundthat,usingwebbrowsinghistories,retailerscanincreasetheirproEitsbymorethan14%,whereasdemographicinformationaffordedonlya.3%increase.

Heconcludedthatsuchpricingisevolvingfromthetheoreticaltothepractical.⁵³

SecondaryTicketMarketsAparticularlyfocusedpushfordynamicpricingistakingplaceinthesportsindustry.It’s

largesecondarymarketforticketsoftendrawspricesmuchhigherthanthestatedticketprice.Therefore,majorleaguesportfranchisesaredrawntodynamicpricingpracticesfortheirticketsales.Ticketscalpinghasbeenaround,possiblylongerthanthepricesticker.Butnotinthe

formofasystematizedmarketmadepossiblebytheInternetandinformationtechnologytoprovidefordirectconsumeraccess.Inthecaseofmajorleaguesports,asigniEicantnewdevelopmenthasbeentheformalizationonlineofthesecondaryticketmarketthroughserviceslikeStubHub.Inresearchtodeterminemodelsforsportsteams’dynamicpricing(Shapiro2013),itwas

determinedthatthevariablesinticketpricingareextensiveandinclude“anemphasison

teamandindividualperformancefactors,ticket-relatedfactors,andtime-relatedfactors.”⁵⁴

ResearchonNationalLeagueFootball’splayoffpricing(butnotthetruesecondaryticketmarket)noted:“Thesecondarymarketillustratesfans’willingnesstopaypricesthatare

considerablydifferentfromtheactualfacevalueoftheticket.”⁵⁵InatestwithananonymousMajorLeagueBaseballfranchise,itwasfoundthatan


Dynamic Pricing – Can consumers achieve the benefits they expect 9E

optimizeddynamicpricingpolicywouldresultinanincreaseof14.3%inrevenue.Anotherresearchpapersuggestedthatsuchpricingwouldincrease1996MLBpricingby$590,000

perfranchise.⁵⁶

Ticketpricingobjectivesincludemaximizingseatrevenuesandattendance.LowerticketpricesaresometimesofferedbecausethereareotherwaystorealizeproEitsthatmaymeet

lesspriceresistance.⁵⁷

PrivacyPolicyExcerptsAspartofthisresearch,theprivacypolicystatementsofaselectionofthelargestretailers

operatinginCanadawerereviewed.Thefollowingexcerptsrelatetouseofpersonalinformationinoffersorpricing.Thesearesubjecttointerpretation,andtheirinclusionisnotevidencethatthecompanyusessuchinformationfordynamicpricing.CanadianTirewill“…trackandanalyzeyourpurchases,othertransactions,shopping

patterns,accountactivity,andpaymenthistoryformarketinganalysispurposesormakingpromotionalofferstoyou.”BestBuywill“tailorouronlinecontentorin-storeofferingstoyoubasedonyour

interactionswithusandyourpreferences”andwill:• Trackandanalyzeyourpurchasesandpreferencestobetterunderstandyourproduct

andserviceneedsandeligibility;• Marketandadvertiseproductsandservices;• Communicatethingslikespecialevents,promotionsandsurveys;• Tailorouronlinecontentorin-storeofferingstoyoubasedonyourinteractionswithus

andyourpreferences….

SearsCanadawill“developanunderstandingofyourneedsandeligibilityforproductsandservicesandtobringyouoffersfromSearsoritsselectedthirdpartyserviceproviders-businesspartners(wemaymakeourcustomerlistavailabletocarefullyscreenedcompanieswhoseproductsorservicesmightinterestyou).”MichaelsCanadawill“sendoffersandinformation.Wherepermittedbylaw,provideyou

withcustomized,unsolicitedoffersandinformationaboutMichaelsproductsandservicesthroughpostalmail.”TheBaysays“…agreeingtotheuseofyourpersonalinformationforadditionalsecondary

marketingpurposesisentirelyuptoyou.YoumaycontactourPrivacyOfEiceatanytimetorequestthatwenotuseyourpersonalinformationformarketingpurposes.Secondarypurposesareanypurposesthatareoverandabovetheprimary/operationalpurposes,likesendingyoucommunicationsthatmayincludenotiEicationsofsales,specialevents,storepromotionsandotherexclusiveoffers.”LowesCanadawill“customizeexperiencesinLowe’sstoresandonline,including

customizedadvertisementsoffers….”Costcowill“…provideyouwithcustomizedSitecontentandadvertising….”Indigo⁵⁸says:“Unlessthepurposeisself-evidentduetothenatureofthetransactionin


Dynamic Pricing – Can consumers achieve the benefits they expect =G

question,Indigowillidentifythepurposesforwhichpersonalinformationiscollectedatorbeforethetimetheinformationiscollected.”

Loblaw⁵⁹saystoexpectitis:“Usinginformationfromthesemarketing,researchandstatisticalanalysestoimproveortodevelopnewproducts,services,programs,promotions,contestsorevents,tobetterunderstandyouandcommunicatewithyouassetoutabove.”

Walmart⁶⁰saysitwillusepersonalinformation“tohelpusimproveandcustomizeourserviceofferings,websites,andadvertising;Tosendyouinformationaboutourproducts,services,andpromotions….”Walmarthasstatedpubliclythatitdoesnotusepersonally

identiEiableinformationfordynamicpricing.⁶¹

ShoppersDrugMart⁶²saysthepurposeofitspersonalinformationcollectionis:• Informingyouaboutspecialoffersandpromotionsorproducts,services,programsor

eventsthatShoppersDrugMartreasonablybelievesmaybeofinteresttoyou;• Enablingyourparticipationincontests,promotions,surveys,chats,seminarsor

workshops,includingcontestswhereentryisautomatic;• Recommendingparticularproducts,services,programs,promotions,contestsorevents

tomeetyourneeds;• Providingyouwithoffersorservicesbasedonthelocationprovidedbyyourmobile

device(alsoreferredtoaslocationbasedadvertising)orbasedonyourinterests….

Staplessays:• Wecollectandusepersonalinformationaboutourcustomerstoidentifythem,to

communicatewiththem,toprotecttheCompanyanditscustomersagainsterrorandfraud,tounderstandwhatproductsandservicesourcustomerswant,toprovideinformationaboutourproductsandservicestoourcustomers,andasrequiredorpermittedbylaw.

• Wewillonlycollectandusepersonalinformationaboutourcustomerstoidentifythem,tocommunicatewiththem,toprotecttheCompanyanditscustomersagainsterrorandfraud,tounderstandwhatproductsandservicesourcustomerswantandtoprovideinformationaboutourproductsandservicestoourcustomers.Wewillnotdiscloseanypersonalinformationconcerningourcustomerstoanyoneelseandwewillnotpermitanyoneelsetousepersonalinformationaboutourcustomersforanypurposewithoutthecustomer'sconsent.

Rogers⁶³saysitcollectspersonalinformation“tounderstandcustomerrequirementsandmakeinformationavailableregardingproductsandservicesofferedbyRogersanditsagents,dealersandrelatedcompanies….”

Bell⁶⁴statesitspurposeforcollectionis:a) toestablishandmaintainresponsiblecommercialrelationswithcustomersandto

provideongoingservice;b) tounderstandcustomerneedsandpreferences,anddetermineeligibilityforproducts

andservices;c) torecommendparticularproducts&servicestomeetcustomerneeds;d) todevelop,enhance,marketorprovideproductsandservices….

Compe--onandBusinessSoEwareMarke-ngDrivingNewBusinessPrac-cesAnalyticsorganizations,technologyproviders,andretailconsultantshavenoshortageof

commentsandrecommendationsfortheuseofbigdataindynamicpricing–personalizedorotherwise.

https://www.walmart.ca/en/help/legal


Dynamic Pricing – Can consumers achieve the benefits they expect =F

PeterFader,marketingprofessor,TheWhartonSchool,UniversityofPennsylvania,believessuchpersonalizedpricesdon’tleadtopricegouging,and,rather,thatitshouldbethenorm,noting“Itshouldn’tbecreeping…itshouldbeexplodingintoretail,”andthatit

Eirstmetwithresistancewhenitwasintroducedintoindustry.⁶⁵

“Ingeneral,dynamicpricingcanbeyoursuretickettohitthemarketwhentheproductis

worthwhile,”⁶⁶notesNDOT,ane-commercetechnologyprovider,cautioningthatsuchpracticesmay“aggravatetheenduser”and/orcausechaosamongconsumers,who“maymakenegativecomments”.

Zilliant⁶⁷SeniorVicePresidentcomments:“Aspricingchannelshavegrownmorecomplex…makingsureyourcustomersreceiveconsistent,relevantpricingateachandeverytouchpointhasbecomenearlyimpossible.‘TheDynamicPricingEngine’ensurescustomershaveaconsistent,fairandaccuratepriceexperienceacrosschannelsandsimpliEiespricingforsalesreps,givingthempricingthatisalignedbothtothemarketand

tocorporateobjectives.”⁶⁸

Telecordia,asuppliertomobilecommunicationsbusinesses,explainshowbusinessescan“leveragedataanalyticsandoptimizationtoincreaserevenueandproEits,growmarket

share,reduceCAPEX(capitalexpenditure),andincreasecustomersatisfaction.”⁶⁹

RTInsightsatechnologycompanynotesAmazonisactingtoremoveMSRPfromits

listings.⁷⁰TheyexpecttheMSRPto“disappearonlineandforgood.”⁷¹Likeotherstheyadvisebusinesstomovetorealtimeoptimizationforpricing.

|ASimplifiedClassificaFonofToday'sCommonDynamicPricingModelsIntroduc-ontoMethodsofDynamicPricingThereisnoshortageofclassiEicationsfor‘dynamicpricing’.YieldManagement.

ConditionalRulesBased.RulesBased.PersonalizedPricing.IndividualPricing.PriceDiscrimination.DifferentialPricing.Oneorganizationexplainsitasoneoffourtypesofdifferentialpricingtactics:• Requiringcustomerstojumphurdles(coupons,rebates,sales,pricematch

guarantees,authenticatingage,purchasinghistory).• Sellingcharacteristics(discountsforvolumepurchases,bundles).

• Sellingstrategy(negotiation,metering)⁷²

Anothernotedthattheformationfactorsfordynamicpricing,throughresearchoftheavailableliterature,determinethefollowingasageneralization,notingthatthereis“noonesolidgenerallyacceptedclassiEication”:1. Customerbehaviourandcharacteristics:particularlythelevelofcustomers’

knowledge,andwhetherthepopulationisEinite.2. Fairprices:The“consumer’sevaluationandunderstandingwhetherthedifference

betweenseller’sandotherparty’spricesisreasonable,acceptableorjustiEiable.”


Dynamic Pricing – Can consumers achieve the benefits they expect =9

3. Marketstructure:Thelevelofcompetitionisakeyfactor.4. Productdemand:Includingthecapabilityofsellerstolearnthechangingpatternsof

demand.5. Theperceptionofproductvalue:Theamountandqualityofinformationiskey.Alack

canaffectthetimingofapurchase.“…theperceptionofvalueisdirectlyrelatedtocustomers’preferenceandchoice.”

6. Seasonality:“PriceschangeandseasonalEluctuationsinEluencesomegoodsmore.”⁷³

Wecategorizedpricingmethodsbasedonsystemsobservableandunderstandablebyconsumers,andseenfromtheirperspective.Basedontheliteraturereviewandtheinitialfocusgroupswesetoutthesecategoriesusedforanalysisandlayoutoftheliteraturereview.:1. Traditional:includesage,dateandvolumediscounts,loyaltyprograms,traditional

salesandcoupons,eventbasedpricing,bundling,goodneighbour/customerdiscounts,geographicdifferences,distributionchanneldifferencesandpricematching.

2. Technology-Enabled/FuelledSupply&Demand:includessurgepricing,forecasteddemandforentertainment,priceadjustmentsbasedoncompetitor/marketpricing,specialtysecondarymarkets,peakelectricityusage,tollingandparking.

3. PersonalInformation/Behaviour/DemographicsEnabled:useofpersonalinformationtopriceindividually,andpastpurchases,shoppingpatterns,personalbehaviour,demographicstodeterminecustomindividualprice.

FollowingaredetailsofrelevantmediacoverageandresearchEindings.

Tradi-onalTraditionaldynamicpricinggetsconsiderablemedia,butseeminglylessoftenthanother

dynamicpricingmodelsthisresearchconsiders.Somepracticesdodrawmedianoticewithinthismodel.Onehigh-endfoodretailerinSwitzerland,Migros,reverseditspositionondiscounts,

charginghigherprices.tothosewhopurchasemore.⁷⁴

Inintroducingnewpremiumfeatures,Tender(thedatingapp)pricedcertainfeaturesuptofourtimeshigherforolderpeople,thoseover28.Theirtestingindicatedthatyounger

users“aremorebudgetconstrainedandneedalowerpricetopullthetrigger.”⁷⁵

Consumersarebeingmovedawayfromtheirsafetyzoneoftraditionaldynamicpricing,whichtotheirbeneEitornot,theygenerallyaccept.Evenwhenitistotheiradvantagesomeconsumersdefylogicwiththeirpreferences.In2012theformerAppleStoreleaderRon

andsquare”everydaylowpricingscheme.Shoppersrebelled,asthey’dcometolovetheir

discounts,fakeorotherwise.⁷⁶

Onlineversusbricksandmortarprovidessomeexamplesofdifferencesinpricingthat

JohnsontookoverasCEOofJ.C.Penney.Hereplacedtheir“fakeprices”withanew“fair


Dynamic Pricing – Can consumers achieve the benefits they expect ==

canvarybycontext.Forinstance,abooksellerchargesfullpriceinaretailoutlet,butgivesa20%discountonline.ItcanreElectthedifferenceindemandorperceivedvalue.Whereas,WalmartCanadausesgeographicdatatoensurethatthepriceaconsumerpaysonlineisthesameastheypayintheirlocalWalmart,aprocessconductedovernight,notmultiple

timesduringtheday.⁷⁷

TechnologyEnabledSupply&DemandSharingEconomyPla_orms“Thetimehascome”forexpandeduseofrapidpricechangestomatchdemand,noteda

DigonexTechnologiesInc.executive,aproviderofdynamic-pricingservices.“It’soneoftheareaswherecompanies,evenbigones,havebeenmaking(pricing)decisionsmostlyongut

feelandpastpractice.”⁷⁸

UberandLift,thetwoprimaryridesharingorganizations,bothchargeincreasedratesduringpeaktimesofdemand,typicallyholidaysandweekendnights.Amazonsellersusedynamicpricingtokeeptheirinventoriesinlinewithdemand.Thesesurgepricesaremeanttosmoothoutdemand,nottopricegouge,sayexpertsand

companies.Expandingthat,in2017Uberadvisedthatitsfooddeliveryprogramusersshouldexpect“inselectcitiestopaymorefordeliverywhentheyorderfromrestaurantsin

areaswheredemandishighbutdeliverypartnersarescarce.”⁷⁹

InresearchingUbersurgepricing(Wilson2015)–andwhetherthelackoftransparencyofthealgorithmallowsartiEicialmanipulationofpricesandwhethersuchpricesarefairto

customersanddrivers–concernswereidentiEiedaboutfairnessandtransparency.⁸⁰

Inanearlierwork,Gurley(2014)notedthefew(10%)ofridesthataresurgepriced,andthatUberistransparentaboutitsdynamicrates.Itfoundthatthesupplyanddemandcurvesarehighlyelastic,statingthatitoperatesthewayaneconomicsprofessorwould

expect.⁸¹

ForecastSupplyandDemand–SportsMainlyEntertainmentDisneychargesfrom4-20%moreonbusydaysforentryintoitsthemeparks.Theyhavea

statedobjectivetospreaddemandthroughouttheyear.⁸²UniversalStudiosdoesthesameat

itsthemeparkinHollywood.⁸³Ticketmasterin2011starteddynamicallyadjustingpricesofeventticketsbasedonchangesinseatsupplyanddemand.AirlinesCarrierslonghaveadjustedpricesforthesameseatbasedondemand,availableseatsand

howfaraheadpassengersmakereservations.AmericanAirlineswastheEirsttoemploythetactic,sometimescalled“yieldmanagement,”withitsso-calledsuper-saverfaresinthe

1980s.⁸⁴


Dynamic Pricing – Can consumers achieve the benefits they expect =>

SportsTheTorontoBlueJaysandmanyotherprofessionalsportsteamssetdifferentpricesfor

thesamestadiumseatbasedontheday,thepopularityoftheteam’sopponentandmyriadotherfactors.TheSanFranciscoGiantsweretheEirstclubtoadoptdynamicpricingin

2009.⁸⁵

ASyracuseUniversityOrangebasketballexecutive,said:“We’lllookatwhatgameshavesoldtraditionallyandwe’lllookatwhatdaysoftheweekthegamesfallon,too.Wereallywanttotakealookatthedataandthestatisticsandmakedecisionsbasedonhowwe’ve

lookedatthosenumbers.”⁸⁶

Fromthesecondarystandpoint,ouronlypartnerinthesecondarymarketisTicketmaster.SowhatIalwayswarnfansis,iftheygotoaproviderthatisn’tafEiliated,theyalwaysruntheriskofitbeingfraudulenttickets.Fromapricingstandpoint,it’sthefan’sopportunitytochoosewhatmarkettheyreallywanttopurchasefrom.I’llalwayswarnthemaboutthesecondarymarket.I’veseenfraudulenttickets.Werunintothoseissuesalot.⁸⁷

Indecidingtoimplementdynamicpricing,theteamcouldnotignorethefactsecondary

marketsweresometimescapturing10-30timestheformerlystandardizedgamepricing.⁸⁸

SoftdrinksCocaColatriedtoimplementtemperaturebasedprices.Consumeroutrageatperceived

pricegougingensuedwhenittriedtolaunchvendingmachineswithweatherdependentpricing–thehottertheday,thehighertheprice,and,asitturnedout,themorehostilethe

consumer.⁸⁹

ParkingLosAngeles,SanFranciscoandSeattleadopteddynamicpricingforparkingmeters,with

ratesthatvarybycityblockandtimeofday,intendingtobettermatchthesupplyofspaceswithdemandandtomaximizerevenue.InToronto,RoverParkingallowsresidentswithemptyparkingpacesinprimelocations

torentthem,earncashandeaseacongestedparkingsituation.RoadTollsInaninvestigativearticleTheGlobeandMailnotedthattheCityofTorontohas

consideredroadtolling,possiblybasedonaElatfee,butthatmanyconsiderthisthewrongwaytogo.MartinCollierofTransportFutures,anadvocacygroup,said:“It’swrongtojust

sayit’sgoingtobe$2allday.Theyhavetohaveadynamicprice.”⁹⁰HighpricesatpeaktimeshavecausedCalifornianstoshifttheirtravelpatterns.ThereisnoagreementonthebeneEitsoreffectondrivingpatterns.Adaptationofconsumerhabitsandexpectationsmaybeakeytogettingroadusersto

acceptdynamicpricing.DavidLevinson,atransportationanalyst,professorandresearcherofroadpricing,told

TheGlobeandMail:“I’dviewitassortofaphasedthing,andthisistheEirststep.…It’s


Dynamic Pricing – Can consumers achieve the benefits they expect =?

mucheasiertomovefromatolltoatollwithdifferentiatedtimeofdaypricesthanitisto

movefromnotolltotolling.”⁹¹

UtilitiesTheexpectationofelectricitypeakpricingmodelsistosaveconsumersmoneybymore

evenlyplacingdemandonelectricity,leadingtogreaterefEiciencyandreliability,and

reductionoftheenvironmentalimpactofproducingelectricity.⁹²Governmentshavesupportedthisaspublicpolicy,seekingtoavoidspendingonnewelectricitygeneration

capacityandaddressobjectivesrelatedtoclimatechange.⁹³

TheMissouriPublicServiceCommissioncitesaninnovativeexampleoffreeenergyfrom

awindsource,after9:00pmwhenusageislower.⁹⁴

CompeFtor'sPriceOfferBasedTheupsideforretailersofdynamicpricingisclear:Theycan,intheory,squeeze

additionalproEitsoutofcustomersinaslim-marginbusiness.WhiledynamicpricinghasyettobetestedagainstCanada’sCompetitionAct,themoreimmediateworryisupsettingcustomers.Givenhowquicklybothinformationandconsumeroutragecanspreadonline,

discriminatorypricingcouldeasilybecomeapublicrelationsnightmare.⁹⁵

SearsSearsCanadaannouncedthatitwouldbeginrevisingpricesofmajorappliancesand

mattressesdailytoguaranteethelowestpriceforcustomers,andisconsideringextending

thepracticeintoothercategories⁹⁶.AmazonAmazonranafoulofcompetitionlawsin2000intheU.S.fordirectingconsumersto

Amazonsuppliersthatpaidthemhigherfees.AmericaninvestigativenewsoutletProPublicaoutlinedhowAmazonusesdynamicpricingtoguideshopperstoresellersthatpayhigherresellerfeestoAmazon.Andbuyersofsimplehouseholdproductsoftenseepricesthatare20%higherthantheusualAmazonprices–unless,ofcourse,theysubscribe

tothecompany’s$100-a-yearPrimeservice.⁹⁷

E.LeclercE.Leclerc,aFrenchretailer,useselectronicshelftagsin200ofits600stores,making

morethan5,000weeklypricechanges.“Thisisnotapassingfad,”the,co-directoroftheUniversityofPennsylvania’scustomer-

analyticsinitiativewasquoted.“It’sgoingtobecomeimperativeforthebrick-and-mortar

playerstoEigureouthowtodothis.”⁹⁸

“RetailersareverymuchemulatingwheretravelwentEiveor10yearsago,”saidaspokespersonfor360pi,whichcollectsandanalyzespricingdataforretailersandbrandmanufacturers.“IntheelectronicssectoronAmazon,we’veseenapricechangeeighttimes,ninetimesinoneday.Iabsolutelythinkit’sbecomemorestandardandthenumberofprice


Dynamic Pricing – Can consumers achieve the benefits they expect =@

changesareincreasing.Iexpectthattrendwillaccelerate.”⁹⁹

Demographics,BehaviouralandPersonallyIden-fiableInforma-onBasedAProPublicareportclaimedthatdemographicsbasedpricingisleadingtounintentional

pricediscrimination,inthat“thePrincetonReview¹⁰⁰waschargingdifferentpricesdependingonthecustomer’slocation.”Thesamecourserangedfrom$6,600to$8,400,

pricedhighestinareas“heavilypopulatedwithAsianAmericans.”¹⁰¹

OfEiceDepotadmittedtheyusecustomers’browsinghistoriesandlocationstodetermine

offersitsends.¹⁰²

InNortheasternUniversity¹⁰³research,fourof10generalmerchandisewebsitesandfourofEivetravelwebsiteshadevidenceofsteering.Customerswerefoundtobesteeredthoroughsearchresultstomoreorlessexpensiveoptionsbasedontheirbrowser

behaviourandwhateverdemographicscouldbedetermined.¹⁰⁴HomeDepotandSearschargedmorewhentheconsumeraccessedtheirsitesusinganAndroiddevicethana

desktopcomputer.¹⁰⁵In2012,Orbitz,theonlinetravelcompany,admittedthatithadbeen

directingMacuserstohigherpricedhotelroomsthanPCusers.¹⁰⁶

Travelocityacknowledgedthattherearesomemobile-onlyofferingsthatdon’tshowwhensearchingfromadesktopcomputer–anincentivetodownloaditsapp.CompanyofEicialshaveindicatedthatresultsarenot“cheaperbydesign”,butsometimesmaybeas

mobileusersaremoreoftenlookingforplacestostayatthelastminute.¹⁰⁷

Mobileonlydealsarecommonlyoffered,includingbyretailerssuchasWalmart,Target

andAmazonintheU.S.¹⁰⁸Thiscouldresultinconsumerslosingoutshouldtheynotdownloadagivenretailer’sapp.SuchpersonalizedpricingcanerodeconsumerconEidence,particularlywheretheyhave

paidmoreforaproductbecauseoftheirpostalcode.“We’veseensomeevidenceofthat,”(referringtotargetingbypostalcodeorwhether

theyuseAppleorPC)notedaspokespersonfor360pi.“Technologyhasgottentoapointwhereit’senabledretailerstogetamuchbetterfeelastowhoislookingatwhichproducts

when.”¹⁰⁹

AWallStreetJournalinvestigationfoundthatStapleshasofferedreducedpricesbasedon

proximityofitscompetitors,withdiscountsavailableiftherivaliswithin20miles.¹¹⁰

Safewayhasexplainedthatittakessixmonthsofitsshoppinghistorycollectedfrom

buyersinits“JustforU”programtobuildaproEilespeciEictoeachcustomer.¹¹¹

Astudyreleasedin2005bytheAnnenbergPublicPolicyCenteroftheUniversityofPennsylvaniaidentiEiedinstancesofdynamicpricingontheInternet.Forexample,aretailphotographywebsitechargeddifferentpricesforthesameproductdependingonwhether

shoppershadviewedprice-comparisonsites.¹¹²Theyfound68%ofAmericanadultswhohaveusedtheInternetinthepastmonthbelieveincorrectlythat“asitesuchasExpediaor


Dynamic Pricing – Can consumers achieve the benefits they expect =C

Orbitzthatcomparespricesondifferentairlinesmustincludethelowestairlineprices.”ConsumersarealsovulnerabletosubtleformsofexploitationonlineandofEline.• 64%ofAmericanadultswhohaveusedtheInternetrecentlydon’tknowit’slegalfor

“anonlinestoretochargedifferentpeopledifferentpricesatthesametimeofday.”• 72%don’tknowthatcharitiesmayselltheirnamestoothercharitiesevenwithout

permission.• 64%don’tknowthatasupermarketisallowedtosellothercompaniesinformation

aboutwhattheybuy.• 75%believethat“Whenawebsitehasaprivacypolicy,itmeansthesitewillnot

sharemyinformationwithotherwebsitesandcompanies.”Theyrecommended:1. TheFTCshouldrequiretheuseof“UsingYourInformation”nottheterm“Privacy

Policy”.2. Schoolsystemsmustdevelopcurriculathattightlyintegrateconsumereducation

andmedialiteracy.3. TheU.S.governmentshouldrequireretailerstodisclosespeciEicallywhatdatathey

havecollected,andwhenandhowtheyusethosedatatoinEluenceinteractionswiththem.

Annenberg“foundthatAmericansarebeggingforopennessintheirrelationshipswith

marketers.”¹¹³

|RelevantLegislaFonandRegulaFonCompe--onEnforcementTheCompetitionBureauthroughtheCompetitionActhasfourcivilandonecriminal

regimeprovisiondealingwithpricing.Thoseunderthecivilregime,andpotentiallyapplicabletodynamicpricing,include(seeAppendixV):• falseormisleadingordinarysellingpricerepresentations(74.01(2)and74.01(3))• baitandswitchselling(74.04)• saleaboveadvertisedprice(74.05)ThecriminalprovisionisSection52,ageneralprovisionregardingfalseormisleading

representationsthatmayleadtocriminalprosecution.Certaineffortsatpricemaintenancemaydrawtheattentionofcompetitionenforcement.Competitionenforcementmayresultintheeventofabuseofdominantposition.Penalties

mayincludeanAdministrativeMonetaryPenalty.TheCompetitionBureaumakesitclearthat“regularpricecomparisonclaimshavea

powerfuleffect,becauseconsumersseekoutgooddeals.”¹¹⁴Referencepricingcanbeimportanttoaconsumer’spurchasedecision.In2009theCompetitionBureauremovedpricediscriminationfromthecriminalpricing


Dynamic Pricing – Can consumers achieve the benefits they expect =D

provisions,insteadaddressingthemundercivilabuseofdominanceprovisions,topromote

“innovativepricingprograms”toincrease“certaintyforCanadianbusinesses.”¹¹⁵

However,inearly2017,theCompetitionBureaufoundthatHBCengagedindeceptivemarketingpracticesbyofferingsleepsetsatgrosslyinElatedregularpricesandthen

advertisingdeepdiscountsontheseprices.¹¹⁶

Adver-singStandardsTheCanadianCodeofAdvertisingStandardsisCanada’sselfregulatory“authority”for

advertisers.TherearenospeciEicreferencestodynamicpricing,althoughthefollowingareasdohaveapplicability(seeAppendixV):Regardingaccuracyandclarity“thefocusisonthemessage,claimorrepresentationas

received”andsuchadvertisementsmustnotcontainmisleadingclaimsorrepresentations.Theycannotomitrelevantinformationthatwillcausedeceptionormisleadingadvertisements.Regardingpriceclaims:“Noadvertisementshallincludedeceptivepriceclaimsordiscounts,unrealisticpricecomparisonsorexaggeratedclaimsastoworthor

value¹¹⁷.”

PrivacyProtec-onThePersonalInformationProtectionandElectronicDocumentsAct(PIPEDA)isrelevantin

commercialtransitionsrelatedtoconsumerspurchasingfromorganizationsinCanada.ThepurposeofPIPEDAissetoutinSection3:

ThepurposeofthisPartistoestablish,inanerainwhichtechnologyincreasinglyfacilitatesthecirculationandexchangeofinformation,rulestogovernthecollection,useanddisclosureofpersonalinformationinamannerthatrecognizestherightofprivacyofindividualswithrespecttotheirpersonalinformationandtheneedoforganizationstocollect,useordisclosepersonalinformationforpurposesthatareasonablepersonwouldconsiderappropriateinthecircumstances.¹¹⁸

“Appropriate”purposesarefurtheroutlinedinSection5(3): Anorganizationmaycollect,useordisclosepersonalinformationonlyforpurposesthatareasonablepersonwouldconsiderareappropriateinthecircumstances.

PIPEDAregulatestheuseofpersonalinformationincommercialtransactions.Scheduleoneappliesandeffectivelydescribesallrequirements,theparticularlyrelevantpartsinclude:

• Principle2–IdentifyingPurposes:⁃ ThepurposesforwhichpersonalinformationiscollectedshallbeidentiEiedby

theorganizationatorbeforethetimetheinformationiscollected.• Principle3–Consent:(Excerpts)

⁃ Theknowledgeandconsentoftheindividualarerequiredforthecollection,use,ordisclosureofpersonalinformation,exceptwhereinappropriate.

⁃ Theprinciplerequires“knowledgeandconsent”.Organizationsshallmakeareasonableefforttoensurethattheindividualisadvisedofthepurposesforwhichtheinformationwillbeused.Tomaketheconsentmeaningful,thepurposesmustbestatedinsuchamannerthattheindividualcanreasonablyunderstandhowtheinformationwillbeusedordisclosed.

⁃ Theformoftheconsentsoughtbytheorganizationmayvary,dependinguponthe


Dynamic Pricing – Can consumers achieve the benefits they expect =E

circumstancesandthetypeofinformation.Indeterminingtheformofconsenttouse,organizationsshalltakeintoaccountthesensitivityoftheinformation.

⁃ Inobtainingconsent,thereasonableexpectationsoftheindividualarealsorelevant.

⁃ Consentshallnotbeobtainedthroughdeception.⁃ Thewayinwhichanorganizationseeksconsentmayvary,dependingonthe

circumstancesandthetypeofinformationcollected.Anorganizationshouldgenerallyseekexpressconsentwhentheinformationislikelytobeconsideredsensitive.Impliedconsentwouldgenerallybeappropriatewhentheinformationislesssensitive.

• Principle9–IndividualAccess:⁃ Uponrequest,anindividualshallbeinformedoftheexistence,use,anddisclosure

ofhisorherpersonalinformationandshallbegivenaccesstothatinformation.Anindividualshallbeabletochallengetheaccuracyandcompletenessoftheinformationandhaveitamendedasappropriate.

OneperspectiveofaCanadianprivacyexpertisthatfromAnnCavoukian,whoservedasInformationandPrivacyCommissionerofOntarioforthreetermsandisnowexecutivedirectorofthePrivacyandBigDataInstituteatRyersonUniversity.“Canadiansareprotectedbylawfrommisuseoftheirdata….Intermsofhowit’sactuallyenforced,it’sahugeworldonlineandtheresourcesofthePrivacyCommissionerofCanadaarevery

limited.”¹¹⁹

Protec-onAgainstDiscrimina-onUndertheCanadianHumanRightsAct(1985),“theprohibitedgroundsofdiscrimination

arerace,nationalorethnicorigin,colour,religion,age,sex,sexualorientation,genderidentityorexpression,maritalstatus,familystatus,geneticcharacteristics,disabilityandconvictionforanoffenceforwhichapardonhasbeengrantedorinrespectofwhicharecordsuspensionhasbeenordered.”Twosectionsofthediscriminatorypracticesarerelevant:• Denyingsomeonegoods,services,facilitiesoraccommodation.• Providingsomeonegoods,services,facilitiesoraccommodationinawaythattreats

themadverselyanddifferently.¹²⁰

ConsumerProtec-onThelanguageofprovinces’generalconsumerprotectionlaw,withrespecttoprices,false,

misleading,deceptiveorunconscionablerepresentationisfairlyconsistentacrossCanada,withtheexceptionofNovaScotialaw’sminimalistapproach.Thisresearchdoesnotnorwasitintendedtoassesstheeffectivenessofprotectionamongprovinces.Also,judicialinterpretationsoftheselawswerenotconsideredbythisresearch.The

researcherswerenotlegalexpertsandthisreviewisintendedonlytoleadtoageneralunderstandingofthecontextbasedonprovinciallawofalegalpriceoffer.Onemayobservethattheprinciples-basedapproachofprovincialconsumerprotection

lawwithrespecttofairpricingcanmaketheassessment,pursuitordefenceofalegalpositionwithrespecttothesematterstimeconsumingandcostly.Theapproachassumesa

http://www.chrc-ccdp.gc.ca/eng/content/what-discrimination


Dynamic Pricing – Can consumers achieve the benefits they expect >G

fairbasisforcompetitionbetweenbuyerandselleristheidealeconomicstate,withthelawaddressingmostlycompetitiveinefEiciencyordishonesty.Asaresultofthecomplexityandtimeconsumingnatureofresolvingunfairnessin

modestlyvaluedtransactions,civilprosecutioninthesemattersfrequentlydefaultstoclassaction.Also,Albertaprovidesforconsumergroups/associationsbeingabletopursueactionsonbehalfofcollectionsofindividualconsumers,butreducesthelikelihoodofsuchactionbycreatingacostsriskforplaintifforganizations.ThisresearchdidnotconsidertheextenttowhichconsumergroupsinAlbertamightuseorhaveusedthisprovision.Amongtheexamplesofwhatmostprovince’slawswouldconsiderfalse,misleadingor

deceptiverepresentationsarerepresentations:• aspeciEicpriceadvantageexists,ifitdoesnot.• arepresentationusingexaggeration,innuendoorambiguity• arepresentationthatmisrepresentsthepurposeorintentoranysolicitationoforanycommunicationwithaconsumerMerchantsandregulatorsmaywishtoconsiderwhetherpresentations(userinterfaceor

algorithmicmodel)fordeliveringpriceoffersmayimplyapriceadvantagethatdoesnotexist,createsanambiguityregardingreferenceprices,ormisrepresentsthepurposeofanonlineretailer’swebsiteasafreemarket.Anunconscionablerepresentationischaracterizedcommonlyinprovincialconsumer

protectionlawasexploitingdisability,illiteracy,ignoranceortheinabilitytounderstandanagreement.Consumerprotectionlawoftenprohibitsofferingapricethatgrosslyexceedsthepriceat

whichsimilargoodsorservicesarereadilyavailabletolikeconsumers,perhapsbasedontheconsumerbeingunabletoreceivemuchbeneEitfromtherepresentationsurroundingtheproduct,andsuchthataconsumermightenterintoaone-sidedagreementtopurchase.Itintendstoprotectconsumersfromcircumstanceswhereaconsumermightfeelunderpressuretobuy.Theseconditionsofrepresentationseemcomprehensiveinintentand,forbetteror

worse,appearopentointerpretation.ApriceoffermaybemadeonthebasisofaclaimofafEiliationorassociation.Anunfair

practiceisconsideredtoresultfromafalse,misleadingordeceptiverepresentation.Thiscouldincludethatthegoodsorserviceshavesponsorship,approval,performancecharacteristics,accessories,uses,ingredients,beneEitsorqualitiestheydonothave,orthatsupplierofthegoodsorserviceshassponsorship,approval,status,afEiliationorconnectionthepersondoesnothave.Anyorallofthesecharacteristicsmightbepartofadynamicallypresentedpriceoffer,

andneedtobeconsideredforaccuracyandclarityofpresentationaloneorincombinationsoasnottoleadtomisrepresentation.


Dynamic Pricing – Can consumers achieve the benefits they expect >F

WhilepricegougingdoesnotnecessarilycontravenetheCompetitionAct,someprovinceshavelegislationthatprohibitstheretailsaleofproductsduringemergenciesat

priceshigherthanchargedbeforethesituation,notablyinOntario¹²¹andAlberta.¹²²Theintroductioninsomeprovincesoflawsgoverningthepreservationofvaluein

rewardsprograms,ifexpandedouttoalltheprovinces,ischangingthedurabilityifnotthetangibilityofthisformofdiscounting,althoughconsumersstillmustrelyuponthegeneralprovisionsofconsumerprotectionagainstmisrepresentationastheyconsidertheinEluenceoftheseprogramsontheirpricedecisionsandattempttounderstandtheirvalue.Someprovincessetthereasonableboundsfordeviationfromaprice“estimate,”which

amountstoapre-salepriceoffer.Thevalueoftheseprotectionsisextinguishedassoonasaconsumeracceptsanofferoutsidetheseboundsandcompletesapurchase.Theselawsprotectconsumers’righttothereasonableavailabilityofgoodstosupporta

priceofferandifinventoryislimited,they’llbeinformed.SpeciEicconsiderationisnotgiveninlawtopriceoffersthatcouldleadconsumerstoconcludesupplyislimitedwhenitisactuallyabundant,beyondthegeneralprovisionsconcerningmisrepresentation.Quebeclawprohibitsthepresentationofa“false”referencepriceinthecontextofaprice

offer.Notablytheprovinceshavevariousapproachestoregulatingeventticketsales,from

preventingorrestrictingpriceonresaletopricecontrolsonsecondarymarkets.

FindingsfromthePublicInterestNetworkQuesFonnaire

|SummaryofResponsesofFirstPINQuesFonnaireWhatisDynamicPricing?ThePINquestionnairerespondentssawdynamicpricingaspricingbasedon:• Supplyanddemandbasedoncurrentmarketconditions,oronexpectedmarket

conditions• Consumers’perceivedabilitytopay• Personalbuyingandbehaviouralhabits,sometimesbasedonadaptablealgorithms• Loyaltyorpreviouspurchasesorbuyingvolume• Cookieswhenpurchasingonline,particularlyfortravelrelatedpurchases• Somethingotherthanthecosttoproduceorprovidethegoodsorservices• TimeofdayMostsawitassupplyanddemandbased.Fewsawitasbasedonpersonalbehaviouror

attributes,and,ifso,citedthetravelindustry,referencingtheuseofbrowsercookies.Manysawitasconfusingorunfairtoconsumers.Fewsawitasadvantageousto

consumers,usingtermssuchas“outrageous”,“cheating”,“unfair”,“targeted”,“toogoodtobetrue”,“notrevealinghiddencosts”,“captivemarket”,“trapped”and“discretionaryanddiscriminatory”.


Dynamic Pricing – Can consumers achieve the benefits they expect >9

Fewreferencesweretotraditionalsales,discountsorloyaltyprograms.

BenefitsofDynamicPricingBeneEitscanbesigniEicant,butaremoredifEiculttoidentifythanthecosts.Theycan

resultinlowerprices,butonlyforthoseawareofthediscountsandwiththetime,Elexibility,volumeorsizeofpurchase,oropportunitytoexploitthem.Somerecognizedthatoverallpricesbasedonwillingnesstopaymaybeeconomically

betteroverall,aspeopleperceivetheygetbettervalue,butitmaynotbepractical.

HarmsofDynamicPricingIngeneral,theharmsidentiEiedwere:• Lackofpricingtransparency,anddifEiculttodetermine.Ifconsumerscan’tcompare

otherpriceoffers,theyaredisadvantaged.Dynamicpricingmethodsmayleaveconsumerslessinformedandunabletomakeoptimalpurchasedecisions.

• Peopleenduppayingmorebecausebigdataenablespricediscrimination,and,asonesaid,“opensthedoortousury.”

• Alackofpredictabilityforconsumers.• Consumerswhodon’torcan’tplanaheadaredisadvantaged.• Insomeservicesscenarios,consumersmayEindtheirchoicelimited,inthatprices

maybehigherattheonlytimesafamilyisavailable,saytoattendaSaturdaybaseballgame.

UseofPersonalInforma-oninDynamicPricingManyexpressedsigniEicantconcernsabouttheuseofpersonalinformation:• Manywereoffended,somesawitasabreachofprivacy,andsomethoughtitillegal.• ItwasnoteditcanbeefEicientifpeoplepaypricesthatareappropriateforthem,but

notentirelypractical.• Therewasagreaterconcernofconsumershavingtopaymorebasedontheirneed,

andnotawillingnesstopaymorebecausetheyseeagreatervalue.Noclearexamplesofpersonalizedpricingwereoffered.TherewassigniEicantcontent

conjectureandanecdotalevidenceofsuchbehaviourprimarilyinthetravelandvacationindustry,particularlybyairlinesinthatfarescanchangebasedonyourhistory,aswellassomeconcernsthatAmazonmakesoffersbasedonpasthistory,butnostrongsuggestionthatthepricevariedbasedonwillingnessorabilitytopay.FewrespondentsnotedspeciEicindustriesofconcern.Theyacknowledgedthecomplexity

ofairlineandtravelpricing,andwereoverallmoreconcernedaboutpersonalinformationbeingusedformarketingthanpricing.

WhatConsumersCanDo?Thelimitedsuggestionsincluded:• Consumerspursuingadditionalpricecomparison,couldusedifferentbrowsers,or


Dynamic Pricing – Can consumers achieve the benefits they expect >=

blockcookies.Theyfelttheyshouldbeabletoshopanonymously,tobeunknown;thatamerchantisnotentitledtoknowwhotheyare.

• Nothing–acceptit.• Demandtoknowhowpricewasdetermined.• Limitpersonalinformationprovided.• Aclearpolicyofguardingyourpersonalinformation.

HowBusinessCanBeMoreTransparentSuggestionsincluded:• Informconsumersthattheypricedynamically,includinghowtheydoit.• Requiringthatbestpricesofferedareguaranteedforaperiodbeforeorafterthe

transaction.• Makeclearertheconsentrequiredfortheuseofpersonalinformation.• Looktoregulatorymodelsusedtoachievefairnessincommoditiestrading,

suggestingthatthismarketplaceissimilar.

WhatGovernmentCanDo?Avarietyofsolutionsweresuggested:• Onecynicallynotedthattherearealreadymanyunenforcedconsumerprotection

• Consumerprotectionlawsbere-evaluatedinlightofanewmarketplace.• Marketsurveillanceandenforcementmethodsforpricingirregularitiesusedby

commoditiesandsecuritiesmarketsmightbeconsidered.• Makingconsumerprotectioninformationmoreaccessible,includinghow

complaintscanbeEiled.EducationwasidentiEiedasakeyregulatoryinitiative.• Requiringdisclosureofpricingpractices,withclearreportingofrecenthighandlow

prices.• Makecleara30-dayno-faultreturnandcooling-offclause,soconsumerswho

determinelatertherewasanissuewiththepurchase,cangettheirmoneyback.

|SummaryofResponsesofSecondPINQuesFonnaireMakingtheUseofDemographicInforma-onMoreTransparentRespondentswerefairlyconsistentlyopposedtodynamicpricing,andthoughtthatthe

generalpricingmethodologyshouldbemadeknowntotheconsumer.Someexpressedconcernregardingtheprivacyaspectsofsomedynamicpricingmethodologies,andtheroletheOfEiceofthePrivacyCommissionershouldplayinprotectingconsumers.SpeciEicsuggestionsincludedanoticeatthecheckoutcounter,oron-productnoticesaboutthedeterminationofprice.Onenotedthat,inadditiontothemethodofcalculation,arationaleforaconsumer’spersonalizedpricemaybenecessary.

laws.Otherssuggestedstrongerdisclosurerules.


Dynamic Pricing – Can consumers achieve the benefits they expect >>

MakingtheUseofPersonalInforma-onMoreTransparentResponsesweresimilartothatofthepriorquestion.Mostwouldprefernodynamic

pricing,butwhereitisinplace,suggestionsincludedclearpricing,theabilityforconsumerstoindicatetheirspeciEicpreferencesfortypeofpricing.Onenotedthatitshouldbebannedthroughlegislation.Thenegativeresponsetotheuseofpersonalinformationwasclearlystrongerthanthatfortheuseofdemographicinformation.

HowPrivacyPolicyNo-cesCanBeImproved“Averyexplicitwarningingreatbiglettersshouldbepostedineverystoreentrancewherethisisdone.ItshouldstatespeciEicallywhatdataiscollected,fromwhatsources,andpreciselywhenandhowitisused.AndtheEinesforerrorsoromissionsshouldbesufEicientlydraconiantopreventrecidivism.IEinditdownrightcreepyandamajorsignofsocialdisintegration.”¹²³

Respondentsgenerallyindicatedthatwheredynamicpricingislegal,andcannotbestopped,prominentwarningsaboutthepracticeshouldbeprovidedclearlyandupfronttoconsumers,andthenoticesshouldbespeciEic,unlikecurrentgeneralizedpresentationsinprivacypolicynotices.

FindingsfromtheFocusGroups

|SummaryParticipantsidentiEiedmanyexamples,includingscenariosbasedonsupplyanddemand

andEixedconditionsandrules.Anglophoneparticipantsweremorelikelytoacceptdynamicpricing,particularlypricingEluctuationsofferedonline,asnormal.Francophoneparticipants,however,expressedconcernsaboutthesocietalimpactsitmayhaveon

consumers.¹²⁴Manyparticipantsknewtheirpersonalinformationiscollectedwhentheybrowseonline,

andrecognizedthattheysometimesbeneEitfrombeingshownparticularpricesbasedontheirpersonalcharacteristics.However,participantsexpressedhigherlevelsofoppositiontoscenarioswheretheywouldbeunawarethattheirpersonalinformationisused,basedonhowoftentheyviewanitemonline,oronthetypeofdevicetheyuse.Participantsweremostlikelytoadvocatefortransparency.Theywantedvendorstosay

howtheirpersonalinformationisusedtosetprices,andforregulatorybodiestostoppricingpracticeswheretheconsumerhasnoawarenessoforcontroloverhowpricesareset.

|GeneralAwarenessParticipantsweregenerallyexperiencedmakingonlinepurchases,includingofclothing,

shoes,travel,eventtickets,electronicsandotherhouseholdgoods.Allparticipantsbrowsedonlineforitems,andsomemadethedecisionin-storeratherthanonline.Fewwerefamiliarwiththetermdynamicpricing,althoughsomewereabletooffer

examplessuchas“surgepricing”forUberandvariablepricingforairfares,concerttickets,


Dynamic Pricing – Can consumers achieve the benefits they expect >?

onlineretail,foodandgasoline.Commentsweremadeconcerning:• Airfare:SomenotedpricesvariedsigniEicantlydependingonmanyfactors.Many

describedElightpricessuddenlychange,pleasedifthepricedroppedandunhappyifitrose.

• Eventtickets:ManynotedsigniEicantticketpricechangesinasecondarymarket,particularlyonesingreatdemand.Manywereconcerned,thatshortagesofticketswereartiEiciallycreatedbyautomatedcomputerprograms“purchasing”andresellingeventtickets.

• Onlineretailing:ParticipantsnotedthatpricesofonlineretailerssuchasAmazonEluctuatedfrequentlybasedonavailabilityandwhatcompetitorscharge.Participantsnotedthatonlinechangeshappenfaster.

• Surgepricing:Uber’spricingstructurewaspositivelyandnegativelycontrastedwithtaxis—notingthatUberistypicallycheaperthanataxi,butthatsurgepricingcreatesa“gamble”whereastaxiprices,beingregulated,werestableandmorepredictable.

• “Quantity”pricingonfood:Manynotedfoodpricescanvarydependingonthequantitypurchased.Someexpressedfrustrationthatthisencouragesconsumerstobuymoreitemsthantheyneed,havingdoneitthemselves.

• “Expiry”pricingonfood:Commonlynotedasawayretailersoftenlowerprices.• Fuelprices:ManyparticipantscitedEluctuationofgaspricesaroundholidaysand

traveltimes.Generally,participantsacceptedthesepracticesaspartofthemarketplace.However,

somefeltthatshiftingpricesmadeitdifEiculttoevaluatethetruevalueofproducts.OthersigniEicantconcernsincludedspendingtoomuchonsaleitems,thedegreeoftransparencyinhowpricesareset,andtheamountofpersonalinformationcollected,

|RevenueManagementvs.Rules-basedPricingInourinitialliteraturereview,revenuemanagementandrulesbasedpricingwerenoted

ascommonwaystodelineatedynamicpricing.Ourinitialquestionsfollowedthisstructure.Whentheseconceptswereexplainedtofocusgroupparticipants,theydidnotgenerallyseeadifferencebetweenthetwo,butwerefamiliarwithmanyoftheexamples.ParticipantssawthebeneEitsfrombothtypesofdiscountedpricingintheeventofhigh

supplyorwhentheycouldbuyat“therighttime”.Theysawitasproblematicwhenconsumershavenochoicebuttopurchaseanitemataparticulartime,orwhendemandis“stoked”duetoalimitedsupply.Inthesecases,participantswanttransparencyonfactorsthatguidepricing.

|DynamicPricingBasedonPersonalInformaFonParticipantsreceivedfourhypotheticalexamplesofdynamicpricingmethodsthatused


Dynamic Pricing – Can consumers achieve the benefits they expect >@

consumer’spersonalorbehaviouralinformationandaskedtodescribethebeneEitsanddrawbacksandtoidentifywhatcouldbedonetoachieveconsumerprotection.Example:VariableHotelPricingForAppleiOSvs.WindowsUsersAtravelwebsiteshowinghigher-pricedhotelstothoseusinganAppleoperatingsystem

thanthosewhouseaWindowsoperatingsystem,becauseresearchhasshownMacownershavedifferentpreferences.Participants’concernsvaried.Torontoparticipantstendedtobemoreaccepting.

Montrealparticipantssawitasdiscriminatory,particularlyagainstAppleuserswithlowerincomes(e.g.students);yet,somesawbeneEitsinproducts/servicesappropriatelytailoredtoconsumerdesires/wants.Manyfeltthattherewaslittleaconsumercoulddoandthat“checks”onsuchbehaviour

wouldbetheresponsibilityofgovernment,orshouldcomethroughconsumereducation.Example:FrequentFlyerPricingWhereairlinesareseentochargefrequent6lyershigherpricesthanothers,basedonthe

rationalethatthosewho6lyoftenwillpayahigherpricebecausetheyneedtotravel,andoftenbecauseabusinesspaysforthepriceoftheirticket.Viewsweremixed.Somefeltthatbusinesstravellerswhopayhigherpricesforairtravel

subsidizethecostforotherswhotypicallypayfortheirownElights.Otherssawthisasanunfairpractice.Again,mostparticipantsfeltthatitwouldbedifEiculttoprotectagainstthispractice.Example:IncreasingAirfaresfor“Interested”TravellersAnairlineortravelsiteincreasesthepriceofa6lightifsomeonehaspreviouslycheckedto

seehowmuchthe6lightcost.PreviouslyparticipantsidentiEiedincreasesinairfaresasacceptableexamplesofdynamic

pricingasitwassupplyanddemandbased.Whentoldthatthismethodmightreferenceabrowserhistoryandthefrequencyatwhich

thebrowseruserviewedtheElightlistingonline,mostthoughtitunfair.ManythoughtitanexampleofairlinesmanufacturingtheperceptionofhighdemandforspeciEicElights.Andtherewasalackoftransparency.SomenotedthatconsumerscouldcleartheirbrowserhistorywhenlookingatElights,butmostfeltthepracticeshouldbedisallowed.Example:GeographicPricingAconsumerispresentedwithacheaperpriceonlinethansomeonewholivesfurtheraway

fromabricksandmortarstoreoperatedbytheonlineretailsiteofthestoreoperator,basedonthepresumptionthatsomeonewholivesnearbywillbemoreenticedtogotothestoretopurchasethisitemifthepriceislow.Somewereconfusedastohowitwouldworkinpractice,buttypicallydidnotfeelitwas

unfair.ManyofferedexamplesofhowretailersoffersuchpricesandoftensawthemasbeneEicial.


Dynamic Pricing – Can consumers achieve the benefits they expect >C

|LinguisFc/CulturalDifferencesIntheEnglish-speakinggroups,manythoughtthatsuchpricingisanaccepted(butnot

necessarilypreferred)practice,andcansometimesbeneEitconsumers.French-speakerswerelessacceptingandraisedmoreconcerns,including:• Constantsales,lastchancediscountsand“losingoutonanopportunity”may

increaseimpulsivespending,andstressandanxietyamongconsumers.Theysuggestedpricingwasa‘game’.

• Thatthedisadvantaged(thosewithlowonlineaccess,computerliteracy,orlowerincomes)aremore“atrisk”.

• Lackoftransparencyanddistrustofbusinesswasmorepronounced,andthatbusinessesholdtheadvantagesinthisscenario,becauseonlytheyknowwhattherulesare.

|PolicyResponsesWhenaskedtoidentifywhatgovernmentagenciesandregulatorscandotoprotect

consumersmostwereunabletoidentifyspeciEicregulatorystakeholders.WhatmostwantedwastransparencyaboutthefactorsthatinEluencedynamicpricing.

Mostparticipantssupportedbanningthemostegregiousexamplesofusingpersonalinformation,suchasraisingairfarepricesbasedoncookies,orchargingusersofspeciEicdevices/operatingsystemsmoremoneyforthesameproduct/service,assumingtheyaremorewillingorabletopay.Participantswantedcompaniestoberequiredtoexplaininplainlanguagethatconsumer

informationmaybeusedtosetpricing.It’sworthrepeatingthatmostparticipantsweresurprisedanddismayedtolearnabout

someofthepricingpracticesbasedonpersonalinformationandsupportedmoreeducationabouthowconsumerscanprotectthemselves.


Dynamic Pricing – Can consumers achieve the benefits they expect >D

FindingsfromtheOnlineSurvey

|TheNumbersinSummaryfromtheSurvey

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

AgreementwithFairnessofPricingMethods

Disagree Neutral Agree

|SummaryOverallThesurveyquestionsandasummaryoftheresponsesfollows:(SeeAppendixIV)for

detailedresponses.Foroursummariesofthe10pointscaleweinclude1-3inDisagreewith


Dynamic Pricing – Can consumers achieve the benefits they expect >E

Fairness,4-7inneutral/ambivalent,and8-10inAgreewithFairness.Intheanalysisofindividualpricingmethodsbelowwereferattimestoamountsinjust

theStronglyDisagreeortheStronglyAgreecategories.TheseareresultswhereindividualsrespondedeitherStronglyAgreeorDisagreeandselectedeither1or10onthesurvey.

Tradi-onalSeniors’DiscountsAnautorepairshopgivesseniorcitizensa15%discountduringslowertimesoftheweek.55%ofrespondentsagreewiththefairnessofthepractice,andlessthan15%viewedthis

asunfairpricing.Volume/QuantityDiscountAgrocerystoregivesanycustomeraquantitydiscountonmostproducts.Fewrespondentssawthisasanunfairpractice,only10%disagreedtoanyextentwithits

fairness,while54%hadbasicagreementastoitsfairness.LoyaltyCardHolderDiscountsApharmacyprovidespricingdiscountsonavarietyofproductstoLoyaltyCardholders.Only15%ofrespondentsconsidereditunfair,45%thoughtitfairand40%wereneutral.

DataOnlineTechnology-enabledSupplyandDemandPremiumPricingforSportsThelocalMajorLeagueBaseballteamchargeshigherpricesforgamesagainstthebetter/

league-leadingandmorepopularteams.Theresponsewiththemostrespondentswasat16%ofthosewhostronglyagree.The

remainderhad45%inneutralresponseswithafairlyevendistributionamongtheremainder.Noclearpatternemerged,otherthanthesimilarresponsetoUberwherethereisasmallbutsigniEicantgroupwithastronglynegativeview.CompetitorBasedPricingAmazonthroughoutthedaymodi6iespricesbasedoncompetitors’pricing.Different

customerscangetdifferentpriceswithinsecondsofoneanother.While33%ofrespondentssawthisaslargelyunfair,thelargestproportionfellwithinthe

fourmiddleneutralresponses,approximately50%ofrespondents.SecondarySportsTicketsMarketThewebsiteStubHuballowsindividualstoresellsportsandentertainmentticketsat

whateverpricethemarketwillbear.Thesinglelargestresponsewas22%ofrespondentsstronglydisagreedwiththefairness

ofsuchpractices.40%respondedneutrallyandtheremainderwereevenlydistributed.

DataOnlineDemographic/Behavioural/PersonalInforma-onSameProduct,DifferentPriceonDifferentSitesAhotelchainwillselltheidenticalroomatdifferentpricesontwodifferentsites–onea


Dynamic Pricing – Can consumers achieve the benefits they expect ?G

luxuryhotelwebsite,oneabudgetwebsite.While27%ofrespondentsdisagreedstronglywiththefairnessofthispractice,only17%

indicatedanydegreeofagreement.BrowserBehaviourPricingAtravelsitetrackswebbrowsercookies&raisespricesforthosevisitinga2ndor3rdtime,

assumingtheyhaveahigherinterestinpurchasing.Inclearlythelargestproportionofrespondentstoanyofthe10questions,41%strongly

disagreedwiththefairnessofthispractice,65%disagreedatleastsomewhatwithitsfairness.BehaviourandPreferenceBasedPricingAretailstorechargesahigherorlowerpricebasedonwhattheythinkaconsumerwillpay,

basedontheindividual’spurchasehistoryand/orpreferences.While35%ofrespondentsdisagreedstronglywiththefairnessofthispractice,only11%

indicatedanydegreeofagreement.

SummaryRegardingGenderIngeneralwomenweremorelikelythanmentodisagreewiththefairnessofthese

dynamicpricingpractices.Therewerethreenotableexceptionstothis,allofwhichwerethosethatreceivedastrongerfairnessassessmentfromrespondentsoverall,thoserelatingtoloyaltyprograms,seniorsdiscountsandquantitydiscounts.Thesediscountsarealloneslikelytobeconsideredmorefamiliar,transparent,andcalculable.

SummaryRegardingAgeIngeneral,olderrespondentswerelesslikelytoagreethatdynamicpricingisfairthan

youngerrespondents.Furtherresearchwouldneedtobedonetounderstandthenuancesoftheseresponses.

|SurveyDataCharts


Dynamic Pricing – Can consumers achieve the benefits they expect ?F


Dynamic Pricing – Can consumers achieve the benefits they expect ?9


Dynamic Pricing – Can consumers achieve the benefits they expect ?=


Dynamic Pricing – Can consumers achieve the benefits they expect ?>

Ken Whitehurst


Dynamic Pricing – Can consumers achieve the benefits they expect ??


Dynamic Pricing – Can consumers achieve the benefits they expect ?@

SummaryLinearRegressionofSurveyQues-ons

FindingsfromtheKeyInformantInterviewsThetextbelowsummarizestheobservationsandviewsofthekeyinformants.

|TradiFonalDynamicPricingTherehasbeentraditionalandemergingdemographic,behaviouralandpersonal

informationenableddynamicpricingforlongerthanmanyconsumerswouldconsider.Pricematchingandcouponsmanyconsumershavelongengagedandaccepted.Insomeretailsettings,salespeopletoday‘size-up’customersandofferthemprices

accordingly.Anexamplecanbefoundinthepriceofferpracticesofnewandusedautomobiledealers,amongothers.Peopleareusedtodynamicpricing,particularlywiththeairlineindustry,often

misattributingdifferentpricesasbasedondifferentpeopleratherthandifferingfeaturesorquality.LoyaltyprogramssuchasAeroplanhavecauseddifEicultiesforsomemembers,asthey

cannowonlyaccesstheprogramelectronically,insomecasescausinglossofaccess,astheyarenotfamiliarwithelectronicaccess.Manyconsumersaremorecomfortablewithdiscriminationtheyperceiveasfavouring

ratherthandisfavouringthem.

|PrivacyKeyinformantshavevaryingopinionsaboutwhetherdynamicpricingpracticespresent

fundamentallyasaprivacy(ordataprotection)problem,manystatingitisapricingproblemforemost.Consumersseldomreadprivacypolicynotices,soconsumerstypicallyremainunaware,

evenifinformed.Currentprivacypolicystatementswerenotgenerallyconsideredagood


Dynamic Pricing – Can consumers achieve the benefits they expect ?C

waytoconveyappropriateinformation,evenifmanyrecommendedchangestodisclosurearemade.Moredisclosureisn’talwaystheanswer.Onenotedthatincreaseddisclosurecancauseconsumerstobeoverlyconcerned,evenwhentheyhavemorerelevantinformation.Furthermore,theprivacyregimemaynotbeeasilyscaledtoaddressthescaleachievedbymoderndataprocessing.Theynotedthatconsumersareconcernedaboutcontrollingtheirprivacy.Buttherewas

littleconsistencyaboutwhatandwhenconsumerswillsharetheirinformationandwhatconstitutesappropriate,automaticsharingofinformation.Viewsaroundthisseemedconfusedanddebatable.Consumerswantmorechoiceintheinformationtheyshare,andhavemadethisknownto

theOfEiceofthePrivacyCommissioner.Despitegeneralagreementamongthekeyinformantsthatexistingprivacylawandregulationsarenottypicallybreachedbydynamicpricingpractices,manysuggesteditmaybeagoodplacetostarttheexaminationofconsumers’dynamicpricingconcerns.Somenotedissuesrelatedtodisclosureofuseofpersonalinformationtosetpriceoffers,aswellasthedifEicultyingathering‘meaningfulconsent’.Oneacademicsuggestedrevampingprivacypolicystatementrequirements,particularly

aroundconsent,tofocusmoreonconveyanceofsocialbeneEits,andnotjustdataprivacyandprotection.Theyaskedwhetherorganizationsreallyunderstandtheircustomersandhowprivacypolicynoticescanbeusedmoreasatransparencytool.Anothersuggestedthatsuchpoliciesareineffectwarranties,andperhapsshouldbemoreclearlynotedassuch.

|ConsumerConfusionKeyinformantsnotedneitherconsumersnorthemarketplacelikeuncertainty,acommon

resultofdynamicpricing.Thisuncertaintytoconsumersappearsatpresenttoposenobarriertobusinessadoption(despitetherecognitionofriskbusinessestypicallyshowconcerningtheintroductionofuncertaintyintomarkets).Asonekeyinformantnotedit’saspectrum.Itgoesfromoneendwhereitis“something

that’sverystatic,verytransparent,verypredictablebutdoesn’tgiveyoualotofchoiceoradvantage,rightovertotheotherside,whichistotallyunpredictable,totallynon-transparentandwherethereistremendouschoiceandopportunity,”(Jenkin)notingthatthisendofthespectrumcanbedifEiculttonavigateandthebeneEitoftheoutcomemaybeuncertainandfraughtwithriskfortheconsumer.Consumerssaytheywant/needonething.Thentheydotheopposite.Theirincongruent

behaviourmayreElectconfusion,inconsistentbeliefsorlackofchoicesalignedwiththeirwantsandneeds.Theywanttolearn/knowthattheyhaveenteredintoareasonablerelationshipwithavendor,oftendon’t,anddespitethiscontinuewithtransactionsfeelingtheyhavenochoice.Uncertaintyarisesfromacomplexmarketplace,particularlyaroundchoiceandprivacy,


Dynamic Pricing – Can consumers achieve the benefits they expect ?D

exacerbatingtheuncertaintyaroundtheuseofdynamicpricing(whetheritisused,howitisusedandtheindividualeffectofthat).Consumerscanshyawayfromthetransaction,possiblytotheirdetrimentwhenthis

uncertaintyreachesasufEicientlevel.Privacypolicystatementsarenotenoughastheystandtodaytoquellthisuncertainty,

despiteapparentlyandgenerallymeetingthelegalrequirementsforthenoticeofuseandconsent,inparticular.

|ConsumerBehavioursMostsuggestthatconsumerbehaviourregardingconsentingtotheuseoftheirpersonal

informationvariesconsiderably.Somesaidtheavailabilityoflargerdatasetsaboutconsumersandtheirbehaviourarecausingreconsiderationoftraditionalassumptionsaboutconsumermotivation,andthosewhocanexploititgetasigniEicantedge.Mostagreethatconsumersdoeventually,whenknowledgeable,seethebeneEitintheuse

oftheirinformationwhenthereisareasonablerelationshipwiththeorganization.Butmostconsumersdon’tyetunderstandthepossibleprosandcons,mostparticularlytheuseoftheirpersonalinformationortheirbehaviourordemographicinformationtosetpersonalizedpricing.Consumershavefocusedmostonnuisancescreatedbymarketingusesofbigdatarather

thanthebeneEitsingeneralofmorerelevantproductsandservicesandhigherproductorserviceavailability,giventhattheymaybewillingtopaymore,orthepotentialforharminthecaseofsomedynamicpricingmethods.Onekeyinformant,focusedonbusinessinterests,notedthatconsumer’sviewsandactionsaroundbigdataarefuelledmorebyfear,uncertaintyanddoubt,thanrationalanalysis.Onenoted,andechoedbyothers,thatconsumerswillcontinuefeelinguneasyaboutthis,

butbusinesswillcontinuetodoitanyway.ItwasperhapsbestsummedupbyaseniorofEiceroftheOfEiceofthePrivacy

Commissioner,whonotedthatconsumerscanbereasonableabouttheuseoftheirinformationifit’sputtotheminareasonableway,but,iftheydon’tknowaboutit,theyoftenclaimthattheywouldneverhaveconsentedintheEirstplace—evenifthatwouldbeagainsttheirinterest.OnenotedthatwhentheU.S.datacompanyAxiommadeknowntoconsumerstheyhad

personalinformationonthem,consumerswereoffended.Whenthedatawasmadeavailabletoconsumerstoverifyandcorrect,manydidso.

|GlobalEconomyThreekeyinformantsbroughttheoverlayoftheInternet’sglobaleconomyasa

signiEicantlycomplicatingfactor.OnelikenedittothechangeusheredinbytheIndustrialRevolution,anotherthattheuseoftechnologybyU.S.orinternationalcorporationsmay


Dynamic Pricing – Can consumers achieve the benefits they expect ?E

seemwonderful,butultimatelymaynotbewhatCanadianconsumerswant.OnenotedthedifferencesbetweenEuropeanandAmericanprivacystandards,lawsand

regulationsdrivinggreaterprivacyprotectionsintheU.S.andCanada,becauseinternationalcompaniescomplyingwithEuropeanrulesmayEinditsimplertooffercommonstandardsofconsumerprotection.

|MethodsandRaFonaleKeyinformantsagreedthatdynamicpricingoccursinvariouswaysanddegrees,with

varyingbeneEitsandharmstoconsumers,butoftenofsigniEicantbeneEittobusiness.Anewdynamicine-commerceismerchants’attemptsthroughtheuseofdynamicpricing

tomakethepriceofgoodslessdependentontheircost.Associatedonlineservicechargesanddifferencesinuserexperiencesarebeingemployedasthebasisforpricedifferentiationforidenticalproducts.Fortheconsumer,thissometimesaddsvalue,butmaycreateuncertaintyinconsumers’understandingofthevalueproposition.Priceoffersthatmayseem“dynamic”totheconsumermayresultfromcomplexity,

instead,itwasnoted.Forexample,inthecaseofanairlineticket,thereferencepricesusedbytheconsumerwhenattemptingtoexercisechoicemaybebasedondifferentservicefeatures.Somenotedthatthedynamicpricinghasbeenmorecommonforlongerforservices,and

thepersonalizednatureofservicesmakestheapplicationofpricingfactorsquitecomplex.Onesaidwhatispricediscriminationtoaconsumerispriceoptimizationtothebusiness.

(Wunderlich)Anothernotedthatthereasonorganizationsusepersonalizedpricingisbasedona

combinationofcostand“businesschoice”.Technologycanbethebarriertoentrytotheuseofbigdataforpersonalizedpricing.Businesstakesadvantageofthiscomplicatedtransactionalenvironment,anditisdifEicult

forconsumersto“disaggregate,analyzeandrespond”tothechangesintheirpricing,totheextenttheyareevenawareitishappening.

|BenefitMostagreedthatsomebeneEitcouldaccruetotheconsumer,butnonesuggestedthatthe

purposeofsuchpricingmethodswasforemosttobeneEittheconsumer.OnenotedthatifpricingbasedonproEileknowledgewastransparentanduserfriendly,itcouldcauseanorganizationlikeAmazonto“actuallyscorepointsfortransparency”.ItwasnotedthatthereisasigniEicantknock-onbeneEitinsomedynamicpricing

situationswherethosewillingtopaywillusemoreefEicientproductsorservices,leavingtheunpaidservicesalittlelesscrowded.Inparticular,tollroadsandcongestionchargeswerecited.OneconsumerreporternotedthatloyaltyprogramscanprovidesigniEicantbeneEitstopeople,particularlywithdiscountcouponsbasedonabusiness’knowledgeof


Dynamic Pricing – Can consumers achieve the benefits they expect @G

thatindividual.Bigdatacanbeusedfortwopurposes:optimizingmerchants’proEitmarginsand

improvingthecompetitivenessofproductandserviceoffers.Furthermore,thebeneEitofknowledgeofaconsumercreatesthepotentialformoreappropriateoffersandproductandserviceplanning.

|TrustKeyinformantsagreedontheimportanceofbusinessesbuildingatrustedrelationship

withconsumers.Manynotedthatgovernmentcanplayakeypartintrust,bothgenerallyandmorespeciEicallygivinganairoflegitimacytoorganizationsfacilitatingthe‘sharingeconomy’.Thesharingeconomyisdemonstratinghowtrustcanbeestablishedmutually,whichcanserveasastrongbasisforconsumeracceptanceofpricing.Thereisanelementoffairnessandmoralitythatconsumersseeandfeelandjudgeon.

(Jenkin)Consistentsafetyandqualitystandardscanengendertrust.Itcanbeabusiness

opportunitytodevelopthem.ItcanbegoodbusinesstotakethestepsnecessarytoimproveconsumerconEidencebuiltontrust.(Wunderlich)Onenotedthatitcanbefruitfultolookatwhat“goodactors”do–howtheyself-regulate

andvalidate–tocreateconsumertrust.Lookingtotheuseofatrustmarkofasort,not

unliketheP3P¹²⁵platformforprivacyontheWeb,wouldbebeneEicialandcouldbestrengthenedbythesupportofconsumergroups.Asonesharingeconomycompanyownernoted:“Attheendoftheday,itreallydoescycle

backtotrust.”

|HarmsThekeyinformantsgenerallyagreedthatbusiness“holdsallthecards,”implyingthis

couldleadeasilytoconsumerharm.Somedescribeddynamicpricingasinvolving“notnecessarilysatisfactorypractices,”(Jenkin)particularlygivenabusiness’“betterpositiontocontroltherelationship.”Onenotedtheongoingissueofloyaltyprograms,andconsumersdesireforthem,buttheincreasedcapabilityforbusinesstobeneEittothedetrimentoftheconsumer.Manyindicatedarisktovulnerableconsumers,whichcanrisebothwhenpurchasing

throughtheInternetorbecauseitisunavailabletothem.(Roseman,Jenkin).TherewasnosigniEicantconcernaboutsigniEicantdamagefromtheuseofanindividual’s

personal,demographicorbehaviouralinformationpastthepotentialinconvenience.Thebiggestconcernaroundharmtoconsumerswasthatpricescouldriseandbea

disincentivetoplanningandsavingforapurchase.Withoutsomekindofcompulsion,businessislikelytoinvestinthwartingeffectiveprice

comparisons,automatedorotherwise,bytheconsumer.


Dynamic Pricing – Can consumers achieve the benefits they expect @F

|BarriersThebiggestbarriertobusinesseslookingtoconveymeaningfulinformationisthelimiting

modelofprivacypolicynotices,exacerbatedbythediversityofconsumerconcernsandneeds.Asonenoted:“aprivacypolicystatementservesmany,manypurposesallatonce,butlikethejackofalltrades,it’sthemasterofnone”.Evenwhenbusinesseswanttobeclear,itcanbedifEicult.It’snecessarytogetconsentfromaconsumer,andtoenablethemto‘optout’.Consumers’expectationsmustbemanaged.Consumersneedtoknowtheimplicationsofgivingthisinformation.Sometimestheyneedtoknowthatfailuretoprovidecertaininformation,meanstheywon’tbeabletocompletethepurchase.(Elder)Manynotedthecomplicatingfactorofmobileanditssmallscreen.Thereareissuesofpracticality,structureandcognitiveissuesforconsumers.(Austin).It’s

difEicultenoughgettingeverythingconveyedfromaregulatorypointofview,withoutchangingthecurrentparadigmofnoticeandconsent.Conveyingtheintricaciesofsomethinglikesurgepricing,isverydifEicult.Differentconsumerswanttoseeitdifferently.Somemaywanttoseethecalculation,othersthemultiplicationfactor,andotherstheEinalprice.“Noone’sdoingthatmentalmathintheirheadbecausetheydon’tknowwhatthatEinalnumberis.ThenmaybeshowingthatEinalnumberisactuallyabetterwaytodoit.”(Wootton)Inessence,combiningthespeciEicidentiEiedneedsofconsumersfordynamicpricing,

withtheconductofbusinesscanbeachallenge.Inthesharingeconomy,atechnologyowner,maybetryingtobalanceaneed“tooptimizeallthreesidesoftheequation,thatbeingyourcut,thatbeingtheowner’s(theconsumerasprovider)cutandthatbeingthepriceconsumersarewillingtopay.Bouncingbacktoapointwhereitcanbeoptimizedisprettytough.”AsEldernoted:“There’sfairlyfundamentalthingsbusinessestrytoresolve:(1)theywant

toknowwhotheyare,sotheycanunderstandmoreaboutthem,sotheycantryand(2)developproductandservicesthatbettermeetthoseneedsand,ofcourse,ultimatelyto(3)sellmore,andtomakemoremoney.Theyalsowanttousepersonalinformationtoservecustomers–toserveindividualcustomers–andtoknowandanticipatewhatcustomerswant.”Manysellersmayconsidertheiralgorithmtobeproprietary,relativetobothbuyersand

othersellers.Theydon’twanttopublicizethem.CurrentlyinGermany,thecourtshaveheldthatthisisthecase,andaccesstopricingalgorithmstothoseoutsidethesellingorganizationhavebeendenied.(Busch).Anothernotedthattheinitialalgorithmmaybeknownbasedonprogrammersand

businessmodelsandformulas,but,asitismodiEiedthroughartiEicialintelligencetypeprogramming,thedetailsofaspeciEictransactionmaybedifEiculttodetermine.


Dynamic Pricing – Can consumers achieve the benefits they expect @9

|RegulatorsManykeyinformantssuggestinganyformofregulatoryaction,typicallyfollowedupwith

aqualiEicationthatcomplexities,andtherapiddegreeofchange,inmarketsegmentsandindustrywouldprovidesigniEicantchallenges.Onesuggestedtheneedforaregulatoryenvironmentthatcreatesabasisforconsumer

protectiontokeepout“pirates”.Thereisn’tastrongregulatoryenvironmentthatcaneasilyenableconsumers’trust

relatingtopricing,determinedbyindividualcharacteristics,soconsumerscangetwhattheyexpect.

|RecommendaFonsDisclosurewasthepreferredrecommendation,butitwasaccompaniedtypicallybya

qualiEier,inthatwhileitmaybeananswer,itisaparticularlydifEicultonegiventhecomplexityofwhatisbeingdelivered.Also,itisproblematicwhetherdisclosurewouldbefaithfullymade.Itwasnoted:“Uncertaintyfavoursthebusiness”,sothatwilldampentheirenthusiasmtoimprovedisclosurewithoutbeingrequiredtodoso.Yettheconclusionwastoincreaseclarityandchoicethroughbetterandmoretimelydisclosure,inanefforttoreducewhatonekeyinformantcalledFUD–fear,uncertainlyanddoubt–inmakingpurchases.Onekeyinformant(Austin)notedthattheparadigmforprivacypolicynoticesshouldbe

turnedfromoneofjustprotectionandsecuritytoonethatstartsengagementaroundthemutualbeneEitoftheuseofsuchinformation.Severalkeyinformants,citingboththecapabilitiesoftechnology,andthevarying

interestsandneedsofconsumersforpricinginformation,suggestedtechnologysolutionsallowingconsumerstogetthecomponentsofpricingbasedontheirinterests.“Thereisnolackoftechnology,justalackofbusinesswill.”(Wunderlich).Multiplekeyinformantsindicatedtheneedforappropriateuserinterfacedesign,whichoneclariEiedasgettingoutofthelaband“gettingintothemindsetoftheconsumer”.(Homan)Onenotedtheuseofatrustmarkandhowconsumerscouldrelyonitasasignof

reputation.Consumersshouldconsiderusingaprivatebrowserwhenpurchasingonline,saidonekey

informantparticularlyfamiliarwithlawandpracticeintheU.S.privacyenvironment.

Dynamic Pricing – Can consumers achieve the benefits they expect @=

VFrameworkDiscussionResearchQuesFons

ConsumerProtecFonFrameworkThefollowingtableindicatesthecurrentrelevance(whereapplicable)ofdynamicpricing

foreachoftheeightconsumerrightsandresponsibilities,andprivacyinthecontextofrecommendationsforconsumers,business,regulatorsandstandardsdevelopers.

Relevance

SafetyThe right to be protected against goods or services that are hazardous to health and life.

The responsibility to read instructions and take precautions. To take action to choose safety equipment, use products as instructed and teach safety to children

Nothing identified as specifically/particularly relevant in the scope of the study.

InformationThe right to be given the facts needed to make an informed choice, to be protected against misleading advertising or labelling.

The responsibility to search out and use available information. To take action to read and follow labels and research before purchase.

Consumers should know whether and how dynamic pricing is used. Its effect can be increased when combined with other merchandizing techniques. Consumers may be uncertain what information to discount in relation to price, and, in any event, by the time they can do so, a price offer may have vanished. It can be difficult for consumers to take action because they don’t have adequate information. Consumers effectively pass the right to choose to business, which may not place their best interest first.

ChoiceThe right to choose products and services at competitive prices with an assurance of satisfactory quality.

The responsibility to make informed and responsible choices. To take action to resist high-pressure sales and to comparison-shop.

To exercise choice, consumers need to know prices relative to competitors.Consumers may find it increasingly difficult, and time consuming to exercise choice in the absence of reference prices – sufficiently durable, comparable, price offers. Consumers can make better choices when they have access to reliable reference prices, and there is fair and transparent pricing based on real supply and demand.. MSRP can be – and many believe to be – a notoriously unreliable reference price.Loyalty programs, while popular with many consumers, may make it more difficult for consumers to compare prices.

Consumers Council of Canada Framework Discussion Research Questions

Dynamic Pricing – Can consumers achieve the benefits they expect @>

RepresentationThe right to express consumer interests in the making of decisions.

The responsibility to make opinions known. To take action to join an association such as the Consumers Council to make your voice heard and to encourage others to participate.

Consumers may easily know when they should make representation, given the opaqueness and complexities of dynamic pricing. Most remedies are complaint triggered enforcement, not typically investigative.Consumers can participate in determination of ways to incorporate personalized pricing into retailers models. Businesses may be reluctant to have consumers understand the algorithm behind a price offer. Representation may only be possible through actors on behalf of consumers with the institutional capacity to do so.

RedressThe right to be compensated for misrepresentation, shoddy goods or unsatisfactory services.

The responsibility to fight for the quality that should be provided. Take action by complaining effectively and refusing to accept shoddy workmanship.

A consumer may lose value in an exchange because they are inextricably attached to a first transaction caused to be undesirable by a seller. Dynamic pricing issues may lead to more “returns” or efforts to obtain redress as consumers subsequently find they may have paid ‘way too much’, or feel deeply ‘buyer’s remorse’.However, the potential to capture a transaction data trail exists, which could facilitate methods of investigation and redress in the event of inappropriate pricing.

Consumer EducationThe right to acquire the knowledge and skills

This is a new complex concept for many. It is important to go beyond disclosure, to educating to develop consumer understanding. It will be considerably more complex to educate about how to compete concerning a price offer made through the deployment of well-crafted algorithms.Given customers’ attraction to non-cash incentive offers (e.g. loyalty programs) that may be detrimental, a need for financial education is indicated.. Consumers may not know that they need education.

Healthy EnvironmentThe right to live and work in an environment that is neither threatening or dangerous and which permits a life of dignity and well-being. The responsibility to minimize environmental damage through careful choice and use of consumer goods and services. Take action to reduce waste, to reuse products where possible and to recycle when possible.

Nothing identified as specifically/particularly relevant in the scope of the study.


Dynamic Pricing – Can consumers achieve the benefits they expect @?

PrivacyThe right to privacy particularly as it applies to personal information.

The responsibility to know how information will be used and to divulge personal information when appropriate.

Consumers expect to know who is using personal information to give price changes, particularly for affiliates, downstream and extra-jurisdictional organizations. They want the opportunity for meaningful consent. Hypothetically, consumers might exercise their responsibility to request removal of their personal information. While privacy policy statements appear to nominally follow the regulations set down in PIPEDA, they are not as effective as purported by business, and exacerbated when transferred to third parties.Concerns abound that privacy is lost, as connections to non-personal information can be used to understand consumers as if retailers had significant personal information dossiers.

DiscussionThecommentsinthisframeworkdiscussiondonotnecessarilyextendtothe

behaviourofallconsumers,orbusiness.Thecommentsregardingconsumersarebasedonthecommentsfromourliteraturereview,thePINsurvey,focusgroups,onlinesurveyandtheinterviewswithourkeyinformants,andreElecttheirviews,fromwhichwehavedrawninsightsandconclusions,incomingtoourEindingsandrecommendations.

|HowWeArrivedatDynamicPricingModelsGroupingBasedontheexpressedopinionsofthePIN,andtheresultsofthefocusgroupdiscussions

wedeterminedthatthetraditionalcategorizationofdynamicpricingsuchasYield/RevenueManagementwereneitherfamiliartoconsumers,noreasilyunderstood.Consequentlywedeterminedcategoriesbasedonaconsumer’sperspective:onethatgroupedfamiliartraditionalpricingdiscounts;asecondthatgroupedpracticesnotuncommonorunknowntoconsumers,butmorereadilyenabledbytechnology;andathird,forpracticesleastknowntoconsumersandthatleveragebigdata,potentiallyincombinationwithtargeted,morepersonalinformation,includingaconsumer’sconductorbehaviour.

|MethodsandRaFonaleTradi-onalConsumersarelargelyawareandacceptingofthetraditionaldynamicpricingmethods,

seeingthemasdiscounting,notasdifferentialpricing.Whileloyaltyprogramsmayhavediscountsbasedonbehaviour,asinpriorpurchasesor

preferences,giventheirlongevityandbroadcurrentusewehaveincludedthemintraditionaldynamicpricing.Furthermore,loyaltyprogramsmayoffernon-cashrewardsinsteadoforinadditiontodiscounts.


Dynamic Pricing – Can consumers achieve the benefits they expect @@

TechnologyEnabled/InfluencedSupply&DemandTechnologyisenablingbusinessestomoreefEicientlyalignpricewithsupplyanddemand.

TheopportunitytoarbitragemarketinefEicienciesismotivatingbusinessestocreateandassertthelegitimacyofsecondarymarketsonline.ExamplesofthedevelopmentofsuchsecondarymarketsareStubHubandLiveNation,resellersofeventtickets.InformationtechnologyincombinationwiththeInternethasenabledmunicipalitiesand

regionalgovernmentstochargemoreorlessforcommoditiesandservicesbasedonpeaktimedemand,toachievebothrevenueobjectivesandsupplymanagementassociatedwithpublicinterestobjectives,examplesbeingroadtolls,parkingfees,andelectricityrates.Largeretailersareusinginformationtechnologytomoreaccuratelymeasureandforecast

demand,tomanageinventories,andexploitproductscarcity,whetherthroughactiontoenhancesupplyorsetprices.

Behavioural,DemographicandPersonalInforma-onForbehaviouraldynamicpricing,it’sthetargeting,meansofdistributionandenhanced

surveillancerelatedtooutcomesthatneedtobeconsideredasissueswithinsuchpricing.ThetimeefEiciencyoftrackingtheseoutcomesisasigniEicantfactorinsuchpricing.Thecompetitivenessofindividualsinpricenegotiationmaybetipped,inthatconsumersareinafurtherweakenedpositionbecausetheydon’thaveaccesstoinformation(andperhapstheunderstandingofinformation)thatresellersdo.AnalgorithmorartiEicialintelligencedoesnotneedtoknowyourname,SIN,location,

phonenumber,IPaddress,etc.,toproEileyourbehaviourandexploityou.TheAIcan“knowyou”andanticipateyouinapersonalwaywithoutreferencetowhathasbeenclassicallyunderstoodtobepersonalinformation.Personalinformationdoesserveapurposeincertaincasesinvolvingbigdatabecausesystemsbasedonusinghistoricaldatahaveusedthiskindofinformationtomatchdatasets.Butconcernsarethatthiskindofdatasetmatchingisusedmostlytodevelopthealgorithms.AIthencandeployincompetitionwiththeconsumer,perhapsnowneedingonlytomakereferencetoaconsumer’sbehaviour.Technologyisenablingbehaviour-basedpricing,takingintoaccountpriorpurchases,

purchasingpatterns,demographicsandcurrentlocation–examplesofthisbeingfoundinexpandingloyaltyprograms.Thebusinessmodelsofsomeservicesareconstructedarounddegreesofvulnerability,givenpreviousresearchtheConsumersCouncilofCanadahas

donearoundcreditorsinsuranceandpaydayloansamongothers.¹²⁶SuchpeopletargetedwillhaveaproEilethatcanbeusedwithouttheirawarenessofthedetailofthepersonallyidentiEiableinformationheldbyaseller.Theymaymisapprehend“distance”inatransactiontoprovideanonymity.Littleevidenceexistsoftheuseofstrictlypersonalinformationforpersonalizedpricing,

andthisresearch’sscopedidnotincludespeciEicallyinvestigatingthis.Ourresearchdidnotidentifyevidenceofentirelypersonalizedpriceoffers.Thisresearchdidnotextendto


Dynamic Pricing – Can consumers achieve the benefits they expect @C

assessingthescopeorEinancialimpactonconsumersresultingfromtechnologydevelopmentsthatintegratetheuseofinformation,personal,demographicandbehavioural,throughalgorithmsandartiEicialintelligence.However,thereissubstantialevidenceofinterestamongsellers,technologydevelopersandinvestors,allofwhomanticipatetovaryingdegreesandsaytheincreasedcomputerizationofpriceoffersandintegrationwiththeprovisionoftargetedinformationtobeahighlyproEitablebusinesspractice.Claims,andresearch,ofachievinghigherbusinessmarginsexist,andthereisanecdotalevidencesomereplyupontosuggestonlinesellersaregainingadvantageovertraditionalcompetitors.Sharemarketcapitalizationsofsomemajor,technologicallycapableonlinesellerssuggestinvestorconEidenceintheprospectsofthesecompanies.Althoughitmustbenotedthatsuchusesare“loosely”allowedforinmostmajor

Canadianretailers’personalprivacynotices,mostconsumersinourfocusgroupsweresurprisedthattheyhavelikelypermittedretailerstousepersonalinformationtoprovidethemindividualizedpricesandclearlythoughtthepracticeswereunfair.Thisperceptionwassharedbyparticipantsintheonlinesurveyconductedforthisresearch.Thereispressureonbusinesstousesuchpersonalinformationpricingreportedinnews

mediaaccounts,whichbasedontheviewsofacademicsandpricingconsultantscharacterizeitassavvybusinessmanagement.Whiletheenhanceduseofdynamicpricingmodelsmaynotbeprevalentasyetormaybeobscuredfrompublicawarenessandnoteasilydiscerniblebyconsumers,thoseresponsibleformakingpublicpolicyconcerningconsumerprotectionandenforcementhavemorethanenoughreasontotakenoteandmaintainwell-resourcedwatchingbriefsconcerningdevelopments.Thehighlevelofinterestinthesubjectbytechnologydevelopersandbusinessalsoindicatestheneedforthis.

Ra-onaleTheriseofshowroomingfrompricetransparencyhasgivenconsumersanadvantagein

informationavailabilityandinsomecasesputretailersatadisadvantageinextractingconsumersurplus.Theuseofmoresophisticatedandcovertdynamicpricingmaynegatepricetransparency,reducecomparisonshoppingandintroducepriceinefEiciency.EconomicallyitisconsideredthatthereisaprogressionofincreasingbeneEittoa

retailer/sellertousedynamicpricing.Aliteraturereviewfoundresearch-basedclaimsthattargeteddemographicinformationcanincreaseproEits1-2%(dependingoncontext),buttheuseoftargetedbehaviouralandpersonally-identiEiable-information-enableddynamicpricingcanincreaseproEitsconsiderablymorethanrelianceondemographicinformation.Thereiscompetitivepressurebeingcreatedbytheavailabilityofeconomicresearch,analyticsorganizationsandpricingconsultantstodevelopsophisticateddynamicpricingpracticesandtoattempttobeEirsttomarketindoingso.Thereisaconcernthattheprimarymarketplaceofcompetitorswillbeforconsumer


Dynamic Pricing – Can consumers achieve the benefits they expect @D

data,nottoserveconsumersbutthemselves.Thosewiththedatawillbeinthebestcompetitiveposition.Thefocusoncompetingforconsumersmaybecomesecondarytothecompetitionfordata.Theorganizationwiththemostandbestdatawins.Furthermore,it’saboutmuchmorethanhavingdata.It’saboutthelevelofsophisticationofdataprocessing,andhowcompetingsellersdevelopitorgainaccesstoit.Wherethisdataisofferedexclusively,orsophisticatedlyprocessed,itcanbedamagingtothecompetitiveforcesinthemarketplace.Howaneconomistseesthepotentialtoincreaseutilityandsurplusmaybequitedifferent

fromhowanindividualmayexperienceit.Oneviewisbasedontheagnosticnatureofeconomicstudyandtheotherisbasedonthepersonalimpactperspectiveonaconsumer-inessence,thedifferencebetweenclassicalandbehaviouraleconomictheories.Theclaimsofpricingsystemdevelopersandsomeresearchersarethatdynamicpricingmodelswillenablesellerstowidenthegapbetweencostsandprices,whichiscontrarytotheassumptionsofmarketstheory.And,furthermore,asthesophisticationofthedataincreases(particularlyasthenumberoftrackedorinferredvariablesincrease),sodoorganizations’proEits.Also,wherebeneEitsdonotaccruetoareseller,becauseoffailedpricingmodels,tothe

extentthatthishas“acrosstheboard”impact,theresultmaybeincreasedcostspassedtoconsumers.

|HarmsConfidenceintheMarketplace

warthatwashaggling.”¹²⁷Itwasn’tperfect,butitproducedasimple,levelplayingEield.Amorecomplexandlesstransparentmarketplaceisnotgoodforconsumers,particularlythevulnerable.And,incomplexareasthatincludedataprivacy,competitive(oranti-competitive)forces,onlinetransactionshappenquickly.Combiningthiswithtargetedmarketingandpricingmethodsandtheuncertaintyandvulnerabilityonlyexacerbates.However,itappearssellersarebecomingenthusiasticforpricingmethodologythat

breaksthe“truce”andmayoffertheconsumernoteventheminimalbeneEitsofhaggling.Consumerscouldbebacktoplayingdefence.Theydon’tknowhowinformationabout

themisbeingusedtocreatepriceoffers.Theydon’tknowifandwhenitisbeingusedandtowhatbeneEitordetrimenttothem,despitebeingpresentedwiththefaçadeofa“betteroffer.”Theyarejustbeginningtounderstandsomeofthecomplexitiesofprivacy.Notallconsumersvalueprivacyinthesameway,letaloneintheapplicationoftheirvaluestodifferentproductsorservices.Theirwillingnesstodivulgesuchinformationvaries,asdoestheirunderstandingoftherealityoftheuseoftheirpersonalinformation.Aspricingmethodsbecomeincreasinglyopaque,theabilityforconsumerstocollectvalid

ThepricestickerasGabrielTardeexplained,“wastheintroductionofatruceintothe


Dynamic Pricing – Can consumers achieve the benefits they expect @E

referencepricesdiminishes.Individualizedoffers,sometimesverytimelimited,complicateconsumers’abilitytomakepricecomparisonsandexercisechoice.Ourresearchsuggestedthatthecompetitioninthemarketplacemaymovemoretooneof

competingforconsumerinformation,thantoserveconsumers.Thefocusofknowledgewillbetoenticeconsumersandpersuadethemtopayhighprices,tosatisfythegoalofhigherproEits.Thisraisestheconcernthattheoutcomewillbefewersellersandlesscompetitionover

timetosatisfyconsumers.

ConsumerPrivacyConcernsTypicallytheprivacyregulationsofPIPEDAarenotbreachedbydynamicpricing.Aslong

astheorganizationindicatesthattheinformationwillbeusedforacertainpurpose,andnoteswhatinformationistakenandensuresthattheminimallevelofconsentisachievedfordoingso,theyareallowedtoconstructawiderangeofdynamicallydetermined,personalpriceoffers,eventhoughtheconsequencesareoftenunknowntoorunappreciatedbytheconsumer.Manyconsumershaveexpressedaclearconcernforprotectingprivateinformation,and,

inoursurveysofthepublicandtheCouncil’sPublicInterestNetwork,consistentlystrongnegativereactionswererecordedconcerningtheuseofdemographic,behaviouralandpersonalinformationtoconstructpersonalpriceoffers.Consumersareespeciallysuspiciousofthepracticewhentheydon’tknowthebasisforconstructinganoffer.TheresearchindicatesconsumerconcernsareexacerbatedbythefactsuchtechniquesaredifEicultformostconsumerstocomprehend.Sotheysuspecttheyareplacedatadisadvantage.CanadianretailersstateintheirpostedpersonalprivacynotiEicationsthatpersonal

informationmaybeusedforpurposesthatarguablywouldincludevirtuallyanytypeofdynamicpricing,includingthatmakinguseofpersonalinformationandbehaviouralinformation.Nonedivulgepossibleimplicationsofpersonalinformationbeingusedtoconstructpriceoffers.Theydon’tsharepotentialrisks,suchascomparison-shoppingbeingmadedifEicultorimpossibleorthattheconsumerwillnotknowthevariablesthatmightleadthemtobeofferedahigherpricethanothers.Theydon’tassureconsumersthatpersonalinformationwillonlybeusedtoofferpricediscounts.Disclosurearoundpossibleintentionsfortheuseofpersonalinformationtosetpricesis

weak.Consumersareunawareofwhattheyhaveagreedto,despitegenerallyaccuratestatementshavingbeenmadetothem.So,disclosurewillnotonitsownnecessarilysolvetheproblem,andcouldworsenit.Morecarefulandeffectivesolutionsmightseektolevelmarketpower,byensuringbothbuyersandsellersarefairlyarmedwithinatechnologicalarmsrace.Ormarketregulationcouldbeusedtocorrectforinformationasymmetriesorsmoothpricevolatilityorpromotedurablepriceoffers.


Dynamic Pricing – Can consumers achieve the benefits they expect CG

Manyconsumersandsomeofthekeyinformantsindicatedthatbetterdisclosureaboutpricingmethodswouldcontributetoabetterfunctioningmarketplace.Butit’slikely,therequireddisclosure,avoluntary,clearstatementofthemethodandimplicationsofpricing,wouldberesistedbyretailers.Consumershaveclearlyindicatedthatiftheyknowsuchpricingistakingplacetheywillreactnegatively.Retailersmayknowthisalready,andbemotivatedtoobscuretheirpractices.Furthermore,asseveralkeyinformantsnoted,thepersonalprivacynoticeistaskedwith

manyrequirements,andprovidingthisinapalatableformformultipledeviceformatsandforconsumerscomingfromdifferentperspectivesandcontexts,someindicatingvulnerability,isadauntingtask,andrealisticallynotoftendoneadequately.Simplechanges,suchaschangingtheterm“PersonalPrivacyNotice”to"HowWeUseYourInformation",assuggestedbytheU.S.FederalTradeCommissionmightbetterdrawconsumersattentiontothiskeyinformation.Furthermore,requiringexpressconsentincontextforuseofsuchinformationwouldbeanimprovementoverthelowbarsetthatanoticeneedonlybepresenttoindicateconsent.Advisingconsumersclearlyabouthowtheycanremoveanorganization’sentitlementtousetheirpersonallyidentiEiableinformationcouldfurthertheirprotection.Currently,asmanyofthekeyinformantsandsomeconsumerssaid,“thebusinessholds

allthecards”inpricesetting.Somekeyinformants,realizingprivacyregulationsmaynotaddresstherisksto

consumersofdynamicpricingmethods,suggestedreformmaybenecessarytoprotecttheconsumer.Inlookingtoprivacy,keyinformantsadvisednotonlytoimprovedisclosureandconsentmechanisms,butalsotorequirethatbeneEitsandrisksofprovidinginformationbedisclosed,controloftheinformationbeexplained,anditsusesandmarketabilitybedeEined.Aproblemlikelytoremainchallengingisthelackoftransparencyofprice-setting

algorithmsortherationalizationofappliedartiEicialintelligence.Inmanycasessellersarelikelytoclaimtheyareproprietary.

Reduc-onofConsumerSurplusTotheextentthatresearchshowsretailers’proEitscanrisesigniEicantlywithdynamic

pricingbasedonindividualizedvariables,mostifnotallofthatgaincomesfromanoverallincreaseinpricespaidbyconsumers.Therewillbesomeutilityincreasesasconsumersinsomecasesdecidetopurchaseproductstheymightnototherwisechoose.Furtherresearchshouldbedoneinthisareatodeterminetheextentofsuchlossestoconsumersandhowitvariesbytypeofconsumerandnatureofthepurchase.

LossofReferencePriceandComparisonFormanyproducts,referencepricingavailabilityhaswaned,tothedisadvantageofthe

consumer.KeyinformantsnotedthelossofMSRPandmoremeaningfulreferencepricesas


Dynamic Pricing – Can consumers achieve the benefits they expect CF

diminishingconsumers’abilitytoassesswhethertheyhavebeenofferedagoodprice.TheMSRPhasbeenusedasareferencepriceeventhoughmanyproductsandservicesareseldomsoldatorneartheirMSRP.Consumersdounderstandthatsomeproductsarerarelysoldbelowthispricelevel,andsomeitems,suchasmattresses,asrarelysoldformorethanhalfofMSRP.ConsumerswantrelativelyreliablereferencepricestoconsultandpriceoffersthataredurableoveraperiodsufEicienttofacilitateconvenientdecisionmaking.Theywouldprefertobeabletoleaveanonlinesiteandreturnwiththeknowledgethatthepricetheywerepreviouslyofferedisstillonoffer.Consumersarepresentedinsomeinstanceswithdistractinginformationthatmay

suggestscarceinventory.Theydonotreallyknowtotalavailableinventory,immediatelyavailableinventory,manufacturer’sinventory,orpotentialfor‘justintimeproduction’toprovideinventory.Consumersdon’tknowwhetherretailersarecreatingpriceofferpresentationstoencouragearushtojudgmentaboutapurchase.InCanada,ifaretailermakesaspecialpriceoffer,theyareexpectedtohaveadequateinventory.Aredynamicpriceoffersonlineconformingtothatexpectation?

StereotypeThreatAsretailersaddmorevariablestotheircalculationsofwhatpricingshouldbefor

individuals,theresearchshowstheyaremoreaccurateintheirassessmentsofconsumers.Butthestateoftheartofmanysuchassessmentsisbasedongeneralization.ThosewhodonotEitthepatternaresubjecttostereotypethreat.Apricingsystemcouldexacerbateastateofinequalityamongvulnerablepersonsbecauseofstereotyping.ThiswouldbedifEicultforanindividualtodetect,butimplementedthroughthousandsormillionsoftransactionstheoverallharmcouldbesigniEicant.Stereotypethreatasrelatedtopricemodellingdeservesstudy.

|ConsumerAwarenessOverallAwarenessConsumersareawareoftraditionaldynamicpricing,andtheirperceptionsofitvary.Theyunderstandthedifferencesbetweentraditionaldynamicandtheemergingmore

covertmethods,evidencedbytheonlinesurveyresultsindicatingthetrendfromtraditionaltopureEirstdegreepricediscrimination.Interestingly,wheretherehasbeennegativepublicity(e.g.Uber)therewasahighspikeatthemostextremelevelofperceptionofthemethodasunfair.Consumersarewaryofpricingonpatternsofpersonalbehaviour–contrarytotheiroft-

statedinterestinspecialoffersattunedtotheirneeds.Theyappeartoaccepttargetedadvertisingbetterthantheydotargetedpricing.ThereareindicationsthatinvolvementinthepricesettingcaninEluencetheirdisposition.

Itwould,however,bedifEiculttopersonallyengageconsumersconcerningeverypriceoffer.


Dynamic Pricing – Can consumers achieve the benefits they expect C9

Businessesprefernottosharetheirapproachtopricesettingwiththeircustomers.Consumersdon’tknowhowpricesareset,andwhetherthepriceoffertheyreceiveis

unique.ItcanbedifEiculttodiscernwhetherapricevarianceisarbitraryorconnectedtofeature/serviceleveldifferences.Forinstance,ahotelsitemayofferthesameroomondifferentwebsitesatdifferentprices.IftheEirstsiteoffersabettertransactionprocessorbundlestheroomwithamenitiesitmaybeconsideredtoofferadifferentserviceorproduct,notapersonalprice.

Tradi-onalDynamicPricingOfthethreedynamicpricingmodeltypesconsideredindetailbythisresearch,the

‘traditional’typesweretheonesmostpositivelyreceivedbysurveyrespondents.Yet,lessthan60%ofconsumersconsideredbothseniors’discountsandvolume

discounts,twotraditionalpricingmethods,tobefair.SigniEicantnumbersofthosesurveyedfeltneutralaboutorfoundthepricingtacticsunfair.Eventhoughloyaltyprogramsarehighlysubscribedandacceptedbyconsumers,only

45%ofrespondentsfoundthemtobefairtotheconsumer.Soconsumersdonotoverwhelminglyconsidertraditionaldynamicpricingdiscountsand

programstobefairpractice.Arguably,agediscountsarediscriminatorybutevokelittleconsumerconcernaboutage

discrimination.Theyappeartobelikestudentdiscounts,asocialnorm.

Technology-enabledSupplyandDemandDynamicPricingThetrendofsurveyresponsesleansmoderatelytothenegativeinthecaseoftechnology-

enabledsupplyanddemanddynamicpricingmodels.However,ingeneral,consumers’negativeviewsarenotasstrongastheirviewsoftraditionalmethodsarepositive.Allfourexamplestestedwereratedasfairbyabout20percentofthosesurveyed,and

about30percentfoundthemunfair.Theremainderofrespondentsfelteffectivelyneutralaboutthesemethods.Individuallyallfourmethodsarelegalanddonotbreach,onthefaceofit,theparticular

regulatoryenvironmentsthatcontrolthem.Lookingatthemindividually:UberSurgePricinggatheredthelargestnegativereactiontofairnessamongthefourtypes

ofpricinggroupedinthismodel.ThisindicatestousasigniEicantnegativeemotionalreactionbysome,whichmayarisefromthesigniEicantnewsmediaexposure,proandcon,Uberhasreceived.Onthefaceofit,Ubersurgepricingseemstobestraightforwardsupplyanddemand

pricing.Concernseemstoariseresultingfrombothconsumers’understandingofthereasonsforasurgingpriceandfromnotknowingthereasonpriceshaverisenpastexpectations.UberdisplaysonlytheEinalprice,withoutreportingpriceinEluences,andnotthemultiplierrelativetoareferenceprice.Forthoseusinga“taxi”,areferencepriceforthe


Dynamic Pricing – Can consumers achieve the benefits they expect C=

normalpriceforacertaindriveisnotcommonlyknown,eventhoughitispostedinthecab.Postingdoesn’talwaysensurethatconsumersunderstandhowpricesarecalculated,partiallybecausetheinformationcanbecomplicatedanddifferentconsumerswanttocometothetotalindifferentways.Arguably,itisnotUber’sbusinessmodelthatismakingitworkforthem,butcommunicationtoprospectivebuyersofwhattheyneedtoknow.StubHuboperatesasecondarymarketforeventtickets,inEluencedbysupplyanddemand

andfundedbytransactionfees.Surveyresponseswerenegativeforthismodel,aswell,butslightlylessnegativethanforUber.Thismayresultfromthedeeplyheldconsumerperspectivesaboutticketscalpingandothersecondarymarketpracticesexperiencedbyconsumershistorically.MajorLeagueSportschargedifferentticketpricesfordifferentgamesscheduledwellinto

thefuture.Thispracticeofvaluingsomecontestsasonesofgreaterpublicinterest,perhapsbasedonpastexperienceoftheseller,appearstoattractlessnegativereactionthanthepriortwotypes.Ostensibly,consumersarefamiliarwithpracticeslikethisinsportsandparticularlyinentertainmentand,perhapsbasedonexperience,recognizethevaluepropositioninvolved.Amazonpricingbasedonsupplyanddemandattractednegativeperceptions,too,butthe

distributionoffairtounfairwasmorelevel.ThereisroomtoconsiderwhetherconsumersbelieveonlineexpressionsofsupplyarerelevanttoactualsupplyorreElectdemand.OverallthewayAmazonapproachessupplyandpricingisconsideredsomewhatunfair.Aswithothertechnologyenabledsupplyanddemanddynamicpricingpracticestherewasalargerpercentinthestrongnegativecategorybutarelativelyevendistributionotherwise.Overall,thisisnotseenasfair,butwebelievemorepeopleeitherareacceptingthatsuchpriceschangeascompetitivefactorschange,ortheyareunaware.Thedifferencenowisthatsuchactivitycanbeappliedtoagreaternumberoflower-priceditems,manytimesadayifnecessary.ThislargeincreaseinthefrequencyofchangesisasigniEicantnewdevelopment,withanattendantriskofunintendedconsequences.

Demographics,BehaviouralandPersonally-Iden-fiable-Informa-on-EnabledDynamicPricingConsumershavesigniEicantconcernsregardingthefairnessofpricingbasedontheir

demographics,behaviourorpersonalinformation—demonstratingstrongernegativereactionthanforanyofthesupplyanddemandortraditionalmethods.WhentheyEindoutthepractice,theyaresuspiciousofthebeneEittothem,evenwhentheymightbefavoured.Theofferofdifferentpricesondifferentsourcewebsitesforthesameproductorservice

isnotnecessarilyinbreachoftheregulatoryrequirementsorguidelineslistedinrelevantlegislationandregulation.Someorganizationsmayoperatemultiplesellingsites,somemayofferpreferredservicesand/orimprovedbuyingexperiencewhenpurchasingthesameitem.Notalldo,andcertainlymanyconsumersexpressanegativeviewaboutthefairness


Dynamic Pricing – Can consumers achieve the benefits they expect C>

ofthemodel.Inusingacookietorecordconsumerbehaviour,aretailerisnotnecessarilybreaching

privacyregulations.TheymaynotuseinformationthatpersonallyidentiEiestheuserorrecordstheirbehaviourtodetermineprice.Theymaybetrackingthebehaviouroftheconsumerbeforetheyelecttopurchase.Giventhepublic’sstrongnegativereactiontothis,andthepositionofmanythattrackingbehaviourindetailmaybeintrusive,regulatorsandbusinessshouldreviewthenatureofthissalesconductcarefullyandconsiderwhetherthereareoptionstoenableconsumerstomakesthemselvesfreeofit.

|BusinessBarriersDisclosureBusinesseslookingtoimprovetheirdisclosurearehamperedbymultipleissues.Different

consumerswantdifferentinformation.Individualconsumer’sneedswillvarydependingonwhattheyarepurchasing.Therearebaselevelregulatorydisclosuresnecessary.MakingsuchinformationavailableeffectivelytoavariedconsumerbaseisdifEicult,particularlyonmobile.

Compe--onforConsumerBigDataAcquisitionofconsumerdatamayallowstrongercompetitivepositioningthan

acquisitionofcustomers,whereorganizationscanaccessdatathatothers(particularlysmallerones)cannot.Organizations,particularlysmallerones,maynothavethepreparednessfor,oraccessto,suchcustomerinformationdisadvantagingthemcompetitively.Someorganizationsmayhaveamonopolisticoroligopolisticpositionindata.ThosewithalargercustomerbasemayhavesuchinformationandcanexploitidentiEiabletrendswithoutevokingprivacyconcernsbasedonpersonalinformation.Thisinformationmaybecomplexandthealgorithmsnecessarytotrulytakeadvantageandtargetwell,maybebeyondthereachofthesmallbusiness.Manysmallerorganizationshavestrongpersonalcustomerinsight,butintransaction

environmentswheretheconsumerdoesn’thighlyvaluehavinganinterpersonalrelationship,thiswillloseitsvalue.Wherethatpersonalinsightremainsimportant,smallerbusinessescanlearnhowtobetterobserveandrespondtotheneedsoftheircustomers,and,inparticular,determinethedatapointsthatwillassistingainingandexploitingthisinsight.

Complexi-esofUsingBigDataAssuminganorganizationcanacquireadequateconsumer“bigdata”theymustbeina

positiontounderstandanduseittomeettheirobjectives.Theymustbeabletocreatethenecessaryalgorithmstocoordinateapriceoffertoachievetheirrevenuegoals,attractconsumersatisfactionandachieveefEiciency.Poordesigncouldresultineconomiclossorconsumerdissatisfactionorboth.


Dynamic Pricing – Can consumers achieve the benefits they expect C?

MaintainingPricingandMarke-nginSyncItwasnotedbysomeresearchersthatitmaybedifEicultfororganizationstokeeptheir

marketingandindividualizedpriceoffersinsync,withoutcomingintoconElictwithconsumerexpectations.This,inandofitself,indicatesperhapsasystemthatisnotintegraltomeetingconsumerobjectivestocreateconsumersatisfaction.Giventhatpricescanbepersonalized/individualized,anypricerelatedmarketing

materialmustbesomehowconsistentwithwhat’sonoffer.AchievingthismaybemoredifEicultforsmallerbusinessesthanlargerbusinesses,andcouldrepresentabarriertoentryforsmallbusinesses.

FearofStereotypeThreatBacklashPricingmodelsconstructedbasedonsomegeneralizationscanfurtherpersonal

stereotypescreatingapublicrelationsproblemforanorganization.Somebusinesses,likeinsurance,modelproductpricesongender,andfailingtodosocouldaffectacompany’ssuccess.Ifstereotypesreliantoncoarseinterpretationsof“bigdata”formthebasisofretailpriceoffers,someconsumerscouldbeharmed.Thiswasnotariskinvestigated,butitisworthhighlightingasaEittargetforresearch.

AlgorithmTransparencyandReten-onItisthecombinationoftheaccurate"BigData",theincreasinglypowerfulunderlying

technology,theconsumer’srapidlyexpandinguseofe-commerce,andthewellconstructedalgorithmthatwillfueltheexpectedexponentialuseofpersonalizeddynamicpricing.Therearerisksofabuseasconsumerscanbepayingonlynominalincreases,butwhendonesointhethousandsormillionsitcanbetheequivalentofincreasedproEits–a”deathbyathousandcuts”forhouseholdbudgetsandasourceofincomeredistributionparticularlysigniEicantforthosewhospendlargersharesoftheirincomeonspendingasopposedtosavingandinvestment.Itisunlikelythatthesealgorithmswillbetransparent.Therefore,boththeprice(relativetocompetitors)andpricingmethodwillborderonopaque.Businesswillseektoclaimsuchalgorithmsasproprietarytoshieldthem.ThereisasigniEicantriskofalackoftransparency,bothfromaconsumerwantingtoknowhowanythingispriced,toenforcementauthoritieslookingforregulatorybreaches.Certainenforcementmechanismswillallowinvestigationofpotentialabuses,forprice

claimabuses,etc.,butwithouttransparencywhat’sthebasisforlayingacomplaint?It'snotsimplytransparencyofthealgorithm,astherearepotentiallayersoftransparencyandtowhomandunderwhatcircumstancesitshouldbegranted.Thealgorithmcouldbeknownifsellerswererequiredtopreservetheircode.Andits

outcomescouldbeauditedifsellerswererequiredtotakeandretainasnapshotofthevariablesappliedtoeachtransaction.Theissueofbigdataandtechnologyande-commerceandpricing,servingasabasisforindividualizedpricing,alsoenablesaclearrecordofbothtransactionsandintentandmethodsofcalculatingprice.Aswellitcanshowtheserelative


Dynamic Pricing – Can consumers achieve the benefits they expect C@

tootherconsumerswiththepotentialforidentifyingabuses.Organizations,awareofthisandtherisksofregulatoryenforcement,wouldbewisetosetreasonablereferencepriceseasilyobtainedand/orpresentedtoconsumers.Thisinformationcouldcomefromtheorganization,otherpurchasedbigdata,orevengovernmentdatacollection,whichalreadyincludespricesonarangeofcommoditiesmonitoredtoestablishtheconsumerprice

index.¹²⁸

|RegulatoryEffortsInthelongterm,oversightofdynamicpricingbyregulatorsneedsconsideration,because

itistooeasytokeepinformationconsumersshouldconsiderawayfromthem.Giventheexpectationofanincreasedcompetitionfordata,perhapsinsomecasesleading

toexclusiveaccessandcontrol,ourconcernisthattheremaybemonopolisticoroligopolistictendenciesintheuseofdata,warrantingrevieworinvestigationbytheCompetitionBureau.Considersection74.04oftheCompetitionActregardingBaitandSwitch.Thisisan

applicationofanotionofpricedurability.Priceadvertisingusuallyincludesastatementofapplicableperiod.ConsiderationshouldalsobegiventoSection54oftheCompetitionActregardingDouble

Ticketing.Offeringdifferentpricesonanidenticalproductorserviceclearlyavailableandofferedatpriceshigherandlowertoothercustomersduringthesametimeinterval,mightbeconsideredinprincipletobethesameasdoubleticketing.

Adver-singGuidelinesPriceisoftenakeycomponentofmanyadvertisingprograms.Aspriceoffersbecome

morecomplex,advertisingguidelinesshouldbemodiEiedtosetoutacceptableapproachesforindicatinganddisplayingindividualizedpriceoffers.UnderAdvertisingGuidelines“Advertisementsmustnotomitrelevantinformationifthe

omissionresultsinanadvertisementthatisdeceptiveormisleading.”Failuretocommunicatethedurabilityofapriceoffercouldservetomisleadconsumers.

PIPEDA&PrivacyPeoplearegenerallyunawaretheirpersonalinformation,whethergathereddirectlyfrom

themorcollectedfromothersources,maybeusedtoconstructpriceoffers,eventhoughtheprivacypoliciesweexaminedformanymajorCanadianandinternationalcompaniesaresufEicientlygeneralinconstructiontocovertheuseofinformationinthisway.TheresultisasigniEicantgapbetweentherealityofprivacyprotectionandconsumers’expectationsforhowpriceoffersmaybeaffected.Regulationsdealingwiththeformofprivacynoticestypicallyappeartobefollowed,but

arevaguewhencommunicatingusesinspeciEictermsconsumersmightrecognizeeasily.Thistakenincombinationwiththewaynoticesareaccesseddoesnotcontributetousers’


Dynamic Pricing – Can consumers achieve the benefits they expect CC

comprehensionofthem.TheU.S.FederalTradeCommissionhassuggestedthatthesenoticeswouldbebetterlabeled:“Waysweuseyourinformation".TheintentofPIPEDAisthatconsumersknowtheyhavegivenconsent,yetthe

effectivenessoftheseprovisionsremainsnominalatbestinthecontextofpriceoffers.Fewconsumerswhenqueriedhadanyideawhattheydidordidnotconsenttopermit.Totheextenttheyareawaretheyareprovidingconsenttoshareprivateinformation,theyoftenbelievetheironlychoice,iftheywishtoproceedwithatransaction,istoagree,recognizingtheyarecompelledtoenterintoaninequitablecontractualrelationshiptouseInternetservicesorengageine-commerce.

ConsumerProtec-onOftheregulation/legislationrelevantorapplicabletodynamicpricing,theonemost

focusedontheconsumeristheprovincialconsumerprotectionlegislation.Amongtheexamplesofwhatmostprovince’slawswouldconsiderfalse,misleadingor

deceptiverepresentations:• aspeciEicpriceadvantageexists,ifitdoesnot.• exaggeration,innuendoorambiguity.• confusingthepurposeorintentofanycommunicationwithorsolicitationofa

consumerMerchantsandregulatorsmaywishtoconsiderwhetherpresentations(userinterfaceor

algorithmicmodel)fordeliveringpriceofferswhettheappetiteofapotentialbuyerbyimplyingapriceadvantagethatdoesnotexist,createsanambiguitywithregardtoreferenceprices,ormisrepresentsthepurposeorintentofanonlineretailer’swebsitetooffera‘freemarket’whentherealityissomethingelse.

StandardsInternationalstandardsareinplaceinmanyareasdesignedtoprotectconsumers,

includingasnotedintheStandardsCouncilofCanada’spromotionalmaterial:• Foodsafetyandquality.• Cleanandsafedrinkingwater.• Safeandeffectivehouseholdproductswhenusedasintended.• Safeconstructionofbothresidentialandcommercialbuildings.• Safeandhealthyworkplaces.• Roadsafetyandtheeffectiveperformanceofvehiclesandtransportation

infrastructure.• Reductioninthefrequencyandseverityofsports-relatedinjuries.ManyofthebeneEitstobusinessfurthernotedbySCCincludestandardsrelatingto

technologiesine-commerce(andeventhosearelimited),theitemslistedaboveforconsumersbeneEitssteerclearoftechnologiesande-commerce,focusingonthesafetyofproducts,notincreasingthereliabilityofcommerceprocesses.Otherareasofstandards


Dynamic Pricing – Can consumers achieve the benefits they expect CD

thathavebeenattemptedincludeprivacyicons,trustsitesandbadges,andaggregatorsandjudgementsofTermsofServicesforwebsites.TherecentdraftingofISO20488OnlineConsumerReviewsandthein-progress

InternationalWorkAgreementontheSharingEconomy,ledbyCSAGroup,areexceptions.Theeraofcomplaints-basedenforcement,rapidlychangingtechnologyandcommerce

environments,andtherapidglobalizationandamalgamationofsigniEicantmarketmakerstogetherdrivetheneedforgreatertransparencyforoneofthemorecomplicatedareasofcommerce,price-setting,particularlywheretheuseofpersonalinformation,includingbehaviouralinformation,and‘bigdata’,ingeneral,isinvolved.Astandardfordynamicpricingwouldinclude:• Sourcingofdata• Transparency• ValidityofData• PrivacyIssues• FeaturesofLocalLaw(e.g.,privacy,discrimination,anti-competition)• Advertising• Pricingmethodologiesandprocesses• DataRetentionandRelatedProcesses• DisputeMechanisms• MarketingSynchronizationTheprimarypurposeofthestandardwouldbetoallowbusinessestopriceusing

dynamicmodels,protectproprietaryalgorithms,andyetinvolveconsumersintheapproach,toensureeffectivecommunicationandensurelegalandaccountablepracticesthatcanbeaudited,orbesubjecttomarketsurveillance,investigationorenforcementinworst-casescenarios.Theobjectivewouldbetodevelopastandardconducivetouseonaglobalbasis,adaptabletotherequirementsofindividualjurisdictions.

StakeholderAnalysis

|StakeholderOutlinesConsumersConsumersareinaweakposition,becausetheyarearetypicallyunawareofhowand

whenpersonalizedpricingisused.Fairandtransparentpricingbasedonrealsupplyanddemand(andrelatedinformation)

canbebeneEicialtoconsumers,particularlywithlargeronlineretailerswheresupplyisnotlocallyconEined.However,consumerssubjecttopersonalizedpricingwillhavelittleinEluencewithretailers,becauseapricehasbeenprescribedforthem.Theycaninquireregardingpricingmethodswithretailers,initiatecomplaintswherenecessary,andrequesttheirinformationbedivulgedand/orremovedfromretailersunderprivacyregulations.But


Dynamic Pricing – Can consumers achieve the benefits they expect CE

theirabilitytoparticipateinthemarketislimited.So,theseconsumerswillbeheardcomplainingabouttheirprivacybeingoffendedwithoutmuchopportunitytoassesstheharm,becausetheywillbeinthedarkaboutthedeterminantsofprices,potentiallywithfeweroptionstocomparethem.

ConsumerGroupsConsumergroupscanassisttheinterestofconsumersinafaircompetitionwithinsupply

chainsandbetweenbuyersandsellersandbyseekinglawandregulationthatassuresthis.TheycanbetrustedinformantstoconsumersaboutthebeneEitsandrisksinherent,seekingtoassesspracticesindividualconsumersmightnothavethetimeorexpertisetoconsiderthoroughly.Consumergroupscanseekanimprovedmarketplace,byofferingconsumersrepresentationtoachievegoodbusinessbehaviour,effectiveregulationwherenecessary,andawarenessandeducationamongconsumersvulnerabletopracticestheymaynotunderstand.

Retail(Online/Bricks&Mortar)Thereisconsiderablepressureonretailerstousebigdatatoimprovepriceofferings,to

maximizeproEits.ThelargerretailershavesigniEicantinEluenceandpotentiallyacompetitiveadvantagein

useofinformationthattheycangather.Furthermore,theycanalsoaffordbettertechnologyandconsultingassistance.DynamicPricingcouldbeintegratedwitheffortstoimproveproduct/services.Merchants

willnotwanttoseeregulationinthisarea,andalmostcertainlynochangeinprivacyregulationsaffectingtheiractions.Manylargermerchantswillneedtobalancetheissuesbetweentheirbricksandmortarstoresandonlineretailpresencestoensuretheyareinsyncfromtheconsumerpointofview.

SharingEconomyProvidersSharingeconomyenterprisesarehighproEile.Typicallytheyassignapricetounder-

utilizedassets,andpricetheuseoftheseassetsbasedondemand.Thetechnologyprovidersareinapositionofdominancetypicallywhenitcomestothepricingmethodology.SomemaybesatisEiedtoberewardedbytheproceedsfromlimitedinventoryofaproductorservice,ratherthantakeaninterestinincreasingsupply.Theseenterprisesarestilldevelopingconsumerunderstandingandacceptanceoftheir

pricingmethodologies.TheymayfacedifEicultiesintheirrelationshipwithprovidersandconsumersunderstandingpricing,sharingtheirmethodologiesorhavingtooffertheiralgorithmsforinspectionasconcernsabouttheirroleinsupplychainincrease.

Sports&EntertainmentOrganiza-onsSportsandentertainmentorganizationsareincreasinglysettingpricesbasedonexpected

demand.Theseorganizationswantashareofthesecondarymarketintickets,asticket


Dynamic Pricing – Can consumers achieve the benefits they expect DG

valuemayincreasebecauseofdifEiculttoforecastcircumstances.ThishasbeenexpandedbyenterprisessuchasLiveNationandStubHub,whichhavebeencapturingpreviouslyunder-exploitedpotentialrevenue,fromconsumerspreparedtobidupaticket’sfacevalue.However,accusationsofself-dealinghaveemerged,andformanyeventorganizersaticketisanentrypointtoamoreextensiveat-eventmonetizationstrategywhichmaybecomecompromisedwhenconsumersurplusistappedoutbeforegainingentryorifeventparticipationisdiminishedbecauseofinefEicienciesinthesecondarymarket.

Travel(Airlines&Accommoda-ons)Travelorganizationshaveusedvariousformsofdynamicpricingfordecades,andare

citedfordoingsobyconsumers,positivelyandnegatively.Theseorganizationscanoperatefrompositionsofdominance,deEinedbytimefactors,consumervulnerabilityandlevelofmarketplacechoice.Theirofferscanbecomplex,deEinedbyanarrayoffeatures,designed,perhaps,todistractasmuchastoservecustomers,inadditiontosupplyanddemandconsiderations.Priceaggregatorsmayplayalargeroleinsalesofsuchproductsandservicestoconsumers.

U-li-es&Municipali-esUtilitiesandmunicipalitiesoftenmanagepublicneedsforservicessubjecttosteeppeaks

andvalleysofdemandandencouragetheredistributionofdemandtoperiodsofunderuseforassetssuchasparking,roadsandelectricity.Thiscanhelpmoderatedemandfornewandexpensivepublicinvestment.However,theseenterprisesoftenmustserveuserswhocannotadapttodemandpricingandmayhavebasicneedsthatgounmet.Theimpactsofdynamicpricingcanpresenttotheconsumerasanexerciseofarbitrarypower,particularlyinthecaseofsoleproviders.

RegulatorsManyareasoflawandregulationareaffectedbythedirectandindirectconsequencesof

dynamicpricing,particularlyviolationofprivacy,unfaircompetitionandunconscionablepricingpractices.Enforcementisoftencomplaintratherthansurveillancebased.Consumerscanbecomevictimsofunanticipatedharm.Advertisingstandards,intheabsenceofvoluntarycompliance,maybeenforcedwithfewertangibleconsequences,even,thanlawsorregulation.Someindustriesmakinguseofdynamicpricingareheavilyregulated,butothers,particularlyretailstores,arenot.Greatercertaintyforbothbusinessandconsumersaboutthelegitimateapplicationof

systematizedpricingmodelswillimprovemarketplaceconEidenceandconsumerprotection.Lawmakersandregulatorsmustaddresslossofprivacy,unfaircompetitionbetweensellerandbuyer,unconscionablepricing,misleadingadvertisinganddiscrimination,allpotentiallyexacerbatedbyaccesstoanduseofbigdata.ThestabilityofmarketsandsystemsofgovernmentoftenreliesonconsumerconEidence,


Dynamic Pricing – Can consumers achieve the benefits they expect DF

whichshouldbecarefullynurturedbybothgovernmentandbusiness.

AcademicResearchersPricing,particularlythroughcomputer-drivenalgorithmsandartiEicialintelligence,isa

growingareaofresearchconcerningeconomics,e-commerceandconsumerprotection.Viewsvaryabouttheimpactofsuchpricingonstakeholders.Becausepricingmodelsdependonalgorithmsandaccessdatasets,demographicand

behaviouralincharacter,arichresourceforinvestigationandanalysisisbeingcreated.Academicinputconcerningmethods,datasourcesandethicalpracticeshouldbeofvalue

toconsumers,consumergroups,businesses,standardsdevelopers,regulatorsandlawmakers.Cautionshouldbetakenthatbusinessincentivesorobjectivesforbusinessalonedonot

deEineacademicresearchagendasinthisarea.Impartialanddiverseapproachestotheresearchwillbeimportantandshouldbeaconsiderationforarbitersofresearchethics.PublicconEidencethatresearchagendasarefreefromtheinEluenceofpecuniaryinterestswillbeimportant.


Dynamic Pricing – Can consumers achieve the benefits they expect D9

|TechnologyEnabledSupply&Demand

Technology Enabled Supply & Demand Dynamic Pricing – ConsumersA presentation of the consumer perspectives of Technology Enabled Supply & Demand dynamic pricing. These are primarily traditional pricing methods which technology has enabled to be more “real time and efficient.”

Benefits & Opportunities Harms & Threats

• Rapid price changes create opportunities for flexible consumers.

• Forecasted demand pricing may increase prices and reduce demand, increasingly the likelihood of getting product.

• Those with fewer funds can access more economical opportunities.

• Consumers may be unable to obtain a price offer sufficiently durable to facilitate price comparisons.

• Impulse purchases increase because of a sense of urgency.

• Undue leverage from suppliers during times of emergency.

Potential to Mitigate Harm Constraints

• Consumers need to complain about lack of price comparison and uncertainty of pricing methodology. Gather evidence of price offers by taking screen shots, etc.

• Consider trusted aggregation sites, particularly those that are crowdsourced, taking care to understand the methodology of collection, moderation and publication. Contribute where possible

• Ability to gather price information sufficiently stable to make comparisons.

• The ability to synthesize price information rationally.• Consumers’ lack of knowledge of how specific price

offers are constructed.• Consumers do not show strong support for these

pricing methods; at best it was neutral.


Dynamic Pricing – Can consumers achieve the benefits they expect D=

Technology Enabled Supply & Demand Dynamic Pricing – Retail (Online and Bricks & Mortar)

A presentation of the retailer perspective of Technology Enabled Supply & Demand dynamic pricing. These are primarily traditional pricing methods which technology has enabled to be more “real time and efficient.”


• Efficient inventory management• Sell product/service for larger profit margin, or sell at a

lower price when otherwise wouldn’t sell.• Have pricing ostensibly more in tune with consumers’

expectations, to the extent they are aware of conditions (e.g., New Year’s Eve surge pricing, end of season ball tickets).

• Damage to reputation.• Loss of future business.• Poor algorithms can reduce profits, must rely on good

information.• Angry, distrustful customers.


• Greater clarity around rationale and components/calculation.

• Allow for consumers to “hold” a price offer, allowing them to return after comparing prices

• Carefully limit charges during times of emergency – weather, blackout, etc.

• Technology required to manage calculation and display.

• Inability to get accurate information and assess need.


Dynamic Pricing – Can consumers achieve the benefits they expect D>

Technology Enabled Supply & Demand Dynamic Pricing – Sharing Economy Providers

A presentation of the Sharing Economy Provider perspective of Technology Enabled Supply & Demand dynamic pricing. These are primarily traditional pricing methods which technology has enabled to be more “real time and efficient.”


• Open and honest surge and high-demand pricing policy communicated well to consumers.Trusted pricing can bring in more consumers and more consumer providers – in a trusted system.

• Pernicious pricing issues when there is emergency demand, due to weather or other unusual event. There is a risk of legal or negative public reaction.


• New rules for emergency pricing on surge and high demand times.

• Communication to consumers of components of surge or high demand pricing.

• Communication to consumers of lower pricing during periods of high supply or low demand.

• As more businesses do it, consumers may develop greater awareness and skills around evaluating such pricing schemes.

• Availability of consumer providers (not necessarily a pricing issue, though).

• Smaller business may not have control over data or what they can calculate, as marketplace expands rapidly with players in and out.


Dynamic Pricing – Can consumers achieve the benefits they expect D?

Technology Enabled Supply & Demand Dynamic Pricing – Sports & Entertainment

A presentation of the Sports & Entertainment organization perspective of Technology Enabled Supply & Demand dynamic pricing. These are primarily traditional pricing methods which technology has enabled to be more “real time and efficient.”


• A clear opportunity to enter into the secondary ticket market – indirectly. Organizations can move to a stricter licensing model for subscribers. The seller of the licence might retain the resale options. Buyers get surrender and exchange rights at some price points, or none at all – simple forfeit.

• Handled badly can cause problems with season ticket holders/subscribers.

• Organizers are struggling to enforce the conditions of license associated with the ticket, perhaps even more so with season ticket holders.


• Consumers understand that certain teams/performances can elicit greater prices.

• Hold back on manipulating for maximum profit. (e.g., don’t keep back tickets for games that will draw significantly higher prices right before game or performance time.) Don’t create artificial demand.

• Existing consumer protection laws regulating reseller rights.


Dynamic Pricing – Can consumers achieve the benefits they expect D@

Technology Enabled Supply & Demand Dynamic Pricing – TravelA presentation of the travel organization perspective of Technology Enabled Supply & Demand dynamic pricing. These are primarily traditional pricing methods which technology has enabled to be more “real time and efficient.”


• Travel sector has used such pricing for decades. It has necessarily managed the time-based inventory under its control.

• Consumer distrust and negative reaction can ensue when they start to understand that pricing may vary on what site they use.

• All pricing, but especially complex price offers, will be susceptible to consumer dissatisfaction within the context of failed service delivery.


• Communicate clearly the methods for pricing.• Efficient delivery of price rebates for failed service

delivery.

• Individual operators, using shared application services, and smaller companies are catching up with larger ones in the use of pricing technology.


Dynamic Pricing – Can consumers achieve the benefits they expect DC

Technology Enabled Supply & Demand Dynamic Pricing – Utilities and Municipalities

A presentation of the utilities and municipalities perspectives of Technology Enabled Supply & Demand dynamic pricing. These are primarily traditional pricing methods which technology has enabled to be more “real time and efficient.”


• Reduce energy use by structuring usage to low use/cost times, reducing demand for new expensive generation and distribution systems and reducing a variety of environmental consequences.

• Introduce and encourage smart consumer behaviours to consumers with full disclosure and the trust of government.

• Managing usage of municipal properties, particularly roads and parking. Assist to optimize use of public transit.

• Public reaction, particularly when monopoly-based pricing model is sold into private hands or resulting from higher or volatile prices.

• Redistribution of income adversely effecting consumers of modest means.


• ‘Smoothed’ use or deployment of limited municipal resources.

• Reduced long-term costs to consumers.• Increase consumer awareness of benefits of limited

energy usage.• Cause consumer to consider new, less impactful

methods of generating and using energy or services.

• Consumer education and resistance to behavioural change.

• Public will and social policy objectives.• Public investment levels.• Managing projects with IT dependencies.


Dynamic Pricing – Can consumers achieve the benefits they expect DD

Technology Enabled Supply & Demand Dynamic Pricing – RegulatorsA presentation of the regulator perspective of Technology Enabled Supply & Demand dynamic pricing. These are primarily traditional pricing methods which technology has enabled to be more “real time and efficient.”


• Consumer and business education about legal pricing practices, identification and reporting of illegal ones.

• Join with standards developers to produce an international standard for ethical, competitive systems of dynamic pricing, led from Canada.

• IT driven pricing should mean algorithms and purchase data to exist for review.

• Consumers may expect surveillance and enforcement outcomes from regulators who are lacking in capacity or ill-prepared to deliver either sufficiently.


• Look for instances of dominant position.• Run investigative tests on pricing to determine

whether it truly is supply and demand, and not fixing based on dominance or e-collusion.

• Whistle-blower laws with rewards.

• The marketplace and technology may be changing too much for highly prescriptive regulation to be effective.

• Complex algorithms for pricing may be beyond the current skillset of regulators to audit.

• Complaints-taking may prove inadequate as a way to determine cause to investigate, since competing businesses and consumers may find it difficult to observe irregularities.

• E-price-collusion may be difficult to observe.


Dynamic Pricing – Can consumers achieve the benefits they expect DE

Technology Enabled Supply & Demand Dynamic Pricing – Standards Organizations

A presentation of the standards organization perspective of Technology Enabled Supply & Demand dynamic pricing. These are primarily traditional pricing methods which technology has enabled to be more “real time and efficient.”


• Market models design exists for some industries (e.g. securities, energy utilities) but retail and most consumer services lack a suitable platform for this work, opening an opportunity for standards organizations that include consumer representation.

• Standards development process hijacked concerning a matter as sensitive to consumers and business competitors as price setting, leading to discredit of standards organization.


• While not a focus of consumer concerns, it could gradually bring consistent price-setting conduct to business, and certification of same according to a defined standard.

• Any difficulty in starting in Canada with CSA Group, or lack of interest by Standards Council of Canada to pursue an international effort. Policy at any of CSA Group, SCC or key regulators such as Innovation, Science and Economic Development Canada and Competition Bureau could stymie such an initiative.

• Businesses might not volunteer to participate.• Consumer representatives might not be supported by

sufficient institutional capacity to deal with such a complex issue area, opening a standards development process to possible collusion around processes to set prices.


Dynamic Pricing – Can consumers achieve the benefits they expect EG

|DemographicandPersonalInformaFonEnabled

Demographic & Personal Information Enabled Dynamic Pricing – ConsumersA presentation of the consumer perspectives of Demographic and Personal Information enabled dynamic pricing. These are primarily individual prices based on behaviour or personal information, or targeted prices aimed at demographics.


• Consumers have indicated a willingness in the interest of convenience to give up their privacy and give other relevant information (e.g., location) in order to be given discount personalized deals.

• In an ideal world economically, consumers are believed to be better off when a true dynamic pricing model is made for each consumer, but this is not practical. A consumer that can trust the seller will consider this a benefit.

• Consumers can receive offers more in tune with their purchase preferences.

• Consumers have a tremendous false confidence.• The details of ‘deals’ may end up causing consumers

to pay more than necessary.• A reliable reference price often is unavailable, and

price comparisons are difficult.• Abuse of personal information by businesses/

organizations.


• Consider trusted aggregation sites, particularly those that are crowdsourced. Evaluate level of trust, and also contribute where possible

• Consumers are in a strong position to mitigate harm to themselves. Options include:

⁃ Educate themselves.⁃ Inform consumer groups of any

potential problems or concerns⁃ Complain to Competition Bureau or

provincial consumer protection authorities

⁃ Question the ways in which such pricing is calculated. Demand to know what information is included.

⁃ Request such information under PIPEDA.

⁃ Demand that consent be clear, meaningful and informed.

• A consumer’s ability to assess their privacy needs, juxtaposed against the benefit of dynamic pricing from a trusted source.

• Consumers have only so much protection as the legislation and regulation allow, particularly around disclosure of use of personal information.

• Many consumers have personal constraints/difficulties regarding the use of technology.


Dynamic Pricing – Can consumers achieve the benefits they expect EF

Demographic & Personal Information Enabled Dynamic Pricing – Consumer Groups

A presentation of the consumer group perspective of Demographic and Personal Information enabled dynamic pricing. These are primarily individual prices based on behaviour or personal information, or targeted prices aimed at demographics.


• A large opportunity for consumer representation and consumer interest advocacy is in the area of demographic and personally identifiable information, as consumers have the most concerns about this pricing method.

• A potentially high-profile issue that strikes hard at consumers’ sense of conscience.

• Research and collaboration opportunities with a variety of stakeholders.

• Advocate to regulators to avoid the damage that can happen, as business will not publicize it.

• Can put substantial strain on consumer groups’ limited resources.


• Advocate for regulatory enforcement of competition and privacy.

• Participate in standards development.• Assist consumers in understanding how price

advertising guidelines may apply.• Assist in initiating complaints in a regulatory

environment exercising little investigative power.

• Difficult for consumers to participate• The damage to consumers can be done within the

law, which will be difficult to change.• Consumers don’t always want change, as they may

confuse harms with benefits.• Effective price surveillance will require even more

resources than at present, and there is really no independent, Canadian consumer group providing reference price information nationally now.


Dynamic Pricing – Can consumers achieve the benefits they expect E9

Demographic & Personal Information Enabled Dynamic Pricing – Retail (Online and Bricks & Mortar)

A presentation of the retailer perspective of Demographic and Personal Information enabled dynamic pricing. These are primarily individual prices based on behaviour or personal information, or targeted prices aimed at demographics.


• Businesses may find it too attractive an opportunity to ignore.

• Research demonstrates 2-3% increase in profit when demographic information is used and considerably more when personal information is used to make price offers.

• A clear competitive advantage/edge exists for those businesses ‘first in’.

• Consumers are largely unaware of pricing that uses their demographic or personal information to determine prices that are not discounts to a standard reference or expected/normative price. Consumer reaction can be negative.

• Relying on incorrect or weak algorithms can lead to negative counter-intuitive results.


• Business “holds all the cards”, and consequently the ability to harm or mitigate harm to buyers. Trusted, reasonable businesses will ‘self censor’ any egregious interest in maximizing pricing under such circumstances.

• Offer minimum and maximum tracking price.• Provide reference pricing to consumers.• Contribute to any effort to develop a standard on

dynamic pricing through ISO or the CSA Group/SCC.• Be transparent about pricing methods, through clear

indication in privacy policy statements.• Make the method of pricing clear to the buyer when

the transaction occurs.• Consider providing buyers with a ‘privacy receipt’ – an

indication of privacy rights about to be ‘used’ during a transaction, to appear on the invoice.

• The technology, data and knowledge to implement.• Using personal information requires more prescriptive

privacy disclosures.• The cost of collection and maintenance, and ensuring

adherence to what may be more regulated environments.


Dynamic Pricing – Can consumers achieve the benefits they expect E=

Demographic & Personal Information Enabled Dynamic Pricing – Sharing Economy Providers

A presentation of the sharing economy provider perspective of Demographic and Personal Information enabled dynamic pricing. These are primarily individual prices based on behaviour or personal information, or targeted prices aimed at demographics.


• Given the nature of the consumer to consumer business and significant technology app usage there is considerable personal information and location and usage data available.

• This will vary by organization and industry within the Sharing Economy. As they start to amass and use big data, the harm to consumers may accelerate, for instance in the taxi industry if data is used to leverage a market position.


• Don’t price based on demographic criteria affecting consumers’ charter rights.

• Consider pricing based on individual to individual transactions, not B2B

• Existing law and regulation affecting access to some markets.


Dynamic Pricing – Can consumers achieve the benefits they expect E>

Demographic & Personal Information Enabled Dynamic Pricing – Travel

A presentation of the travel organization perspective of Demographic and Personal Information enabled dynamic pricing. These are primarily individual prices based on behaviour or personal information, or targeted prices aimed at demographics.


• Consumers cite airlines as first example of dynamic pricing. Opportunity to explain pricing.

• Travel industry has experience in the area and can be first to truly step further into the profitable use of personal information.

• Accommodation can use differing referral sites to charge different rates without breaching any privacy or other regulation.

• Travel has benefited from dynamic pricing and resignation and acceptance of consumers. This may open a public discussion to their detriment.

• Aggregated market websites, such as Trivago, can enable consumers to get lower price and cause consumers to expect price inefficiencies to exploit.


• Lead in explaining the method of pricing.• Accommodation can take the opportunity to explain

that lower paying customers may get less choice or lower value proposition at hotel.

• May be very difficult to explain to consumers given the complexity, and even those consumers who want to do so may be unable to decipher such information.


Dynamic Pricing – Can consumers achieve the benefits they expect E?

Demographic & Personal Information Enabled Dynamic Pricing – Regulators

A presentation of the regulator perspective of Demographic and Personal Information enabled dynamic pricing. These are primarily individual prices based on behaviour or personal information, or targeted prices aimed at demographics.


• A regulator’s mission is arguably a better marketplace. • Educate and increase awareness of regulator’s role.• Opportunity for detailed documentation of market

conduct. Algorithms and data concerning the transactions are potentially available to audit and investigation. Automated market surveillance could be devised when merited.

• Pressure from groups for regulators to act when it is not within their current authority, particularly privacy regulators.

• Regulators become overwhelmed by public expectations for surveillance and enforcement in a sea of data without the technical expertise to parse it.

• Complaints-based enforcement model hampered by lack of ways to observe pricing behaviour, preventing probable cause to investigate from being easy to demonstrate.


• Enforce privacy intent. Make clear that pricing will differ from customer to customer and the basis for legal differentiation.

• Make eminently clear that consent from consumers must be obtained for use of personal information.

• Enforcement of anti-competitive behaviour and privacy breaches are complaint driven and poorly funded.

• Increasingly difficult to determine cases of anti-competition and pricing discrimination given their complexity.

• Lack of awareness of when consumers are ‘fleeced’, especially when it’s for modest amounts collected on a large scale.


Dynamic Pricing – Can consumers achieve the benefits they expect E@

Demographic & Personal Information Enabled Dynamic Pricing – Academic Researchers

A presentation of the researcher perspective of Demographic and Personal Information enabled dynamic pricing. These are primarily individual prices based on behaviour or personal information, or targeted prices aimed at demographics.


• Dynamic pricing and price responses could offer a considerable source of data from which to derive insights into consumer behaviour.

• Such research can provide information into a more fluid economy as dynamic pricing is a key part of transactions.

• Strong brand associations between business proponents and academics studying business practices may lead some to conclude academics are working for business and not consumers, especially where sensitive and attention-grabbing issues like pricing methodology are involved.


• Engendering an open discussion of such pricing. This may be one of the few ways to determine the actual facts and methods. The need for market surveillance may be heightened.

• Access to data necessary to analyze such transactions and methods may be closely held by organizations unless transparency is required, whether in real-time or on an historic basis.


Dynamic Pricing – Can consumers achieve the benefits they expect EC

Demographic & Personal Information Enabled Dynamic Pricing¹²⁹ – Standards Organizations

A presentation of the standards organization perspective of Demographic and Personal Information enabled dynamic pricing. These are primarily individual prices based on behaviour or personal information, or targeted prices aimed at demographics.


• Create a pricing transparency standard, originating in Canada, to outline methods of dynamic pricing, including disclosure and processes.

• Effort made before the chips are down to set out what the standards for dynamic pricing should be.

• Market models design exists for some industry’s (e.g. securities, energy utilities) but retail and most consumer services lack a suitable platform for this work, opening an opportunity for standards organizations that include consumer representation

• Push Competition Bureau to begin to encourage standardization as a transition to regulation, if necessary.

• Opportunity to partner with an organization like the Competition Bureau to encourage adoption of a standard and voluntary model conduct.

• Standards development process hijacked concerning a matter as sensitive to consumers and business competitors as price setting, leading to discredit of standards organization.


• Standards are a very effective method for flexibly bringing about order in a rapidly changing field, and can be more quickly adopted globally, much as has taken place with online e-commerce.

• Ensure highly capable, independently resourced consumer representation is included in any related standards development or maintenance processes, to guarantee against cartel-like conduct, ensure the consumer perspective is well considered, and assure the process is both legitimate and seen to be so.

• OECD Consumer Policy committee guidelines can be reviewed and emulated.

• Standards can be quickly portable across national boundaries through private sector implementation.

• Produce a standard that could enable long-term reliance and audibility of algorithms and connect them to original transactions

• This is a rapidly changing field, and while standards

standards setting still takes years, not months to accomplish.

• Any difficulty in starting in Canada with CSA Groups, or lack of interest by Standards Council of Canada to pursue an international effort. Policy at any of CSA Group, SCC or key regulators such as Innovation, Science and Economic Development Canada and Competition Bureau could stymie such an initiative.

• Businesses might not volunteer to participate.• Consumer representatives might not be supported by

sufficient institutional capacity to deal with such a complex issue area, opening a standards development process to possible collusion around processes to set prices.

are more agile and quick than regulatory effort,

Dynamic Pricing – Can consumers achieve the benefits they expect ED

VIConsumerProtecFonFrameworkRecommendaFons

ConsumersSafetyThe right to be protected against goods or services that are hazardous to health and life.The responsibility to read instructions and take precautions. To take action to choose safety equipment, use products as instructed and teach safety to children.InformationThe right to be given the facts needed to make an informed choice, to be protected against misleading advertising or labelling.The responsibility to search out and use available information. To take action to read and follow labels and research before purchase.

• Seek out the facts.• Ensure you have an understanding of the

benefits that such information may provide you, outside of the pricing arena.

• If you choose to use private or incognito browsing ensure that you understand its particular limitations, which can vary by browser.

• If a price is more than you expect, where possible, ask how the price is derived.

• Be suspicious of limited inventory claims.• Be suspicious of reference prices (this is

nothing new).• Where a website has inadequate information

to explain pricing methods, express this to the business, and share with consumer groups or consumer protection agencies.

• Take into consideration that what may be presented as distinct brands may be sold by associated sellers. Some online offers are made by lead gatherers not sellers.

• Consider that the seller knows you better than yourself. Also, the seller may make wrong assumptions about you that influence the offers you receive, including the price you may be offered.

Consumers Council of Canada Consumer Protection Framework Recommendations

Dynamic Pricing – Can consumers achieve the benefits they expect EE

ChoiceThe right to choose products and services at competitive prices with an assurance of satisfactory quality.The responsibility to make informed and responsible choices. To take action to resist high-pressure sales and to comparison-shop.

• Look to identify a valid reference price for the purposes of comparing prices, particularly when significant purchases are involved.

• Take screen shots of prices offered and, if a subsequent price is higher, or lower, use your evidence of the price offer to inquire about getting a best price from your preferred supplier.

• When purchasing, check different sites that provide the same product or service.

• Don’t completely rely on sites that aggregate and recommend a best price. Even for these, compare with your reference price.

RepresentationThe right to express consumer interests in the making of decisions.The responsibility to make opinions known. To take action to join an association such as the Consumers Council to make your voice heard and to encourage others to participate.

• Inquire or complain to consumer groups when you feel you have evidence or suspicion of unfair price manipulation.

RedressThe right to be compensated for misrepresentation, shoddy goods or unsatisfactory services.The responsibility to fight for the quality that should be provided. Take action by complaining effectively and refusing to accept shoddy workmanship.

• Report to the Competition Bureau or provincial government consumer protection departments where a price is unreasonably higher than can be found elsewhere, especially if that price is falsely touted as a competitive one.

Report suspicions of illegal price offerings, including:• Lack of statement of purpose for collecting

personal information for pricing• No consent obtained for use of personal

information for pricing• Discriminatory pricing activity contrary to

charter rights, e.g., race or religion• Bait and switch pricing

Consumer EducationThe right to acquire the knowledge and skills necessary to be an informed consumer.The responsibility to take advantage of consumer education opportunities. Take action by attending seminars and workshops, work to ensure consumer education takes place in schools.

• Plan to take advantage of traditional dynamic pricing discounts.

• Be patient in purchasing – if you haven’t compared prices, don’t be rushed.

• Consumer groups can help consumers understand what consumers should reasonable expect from a price offer.

Healthy EnvironmentThe right to live and work in an environment that is neither threatening or dangerous and which permits a life of dignity and well-being.The responsibility to minimize environmental damage through careful choice and use of consumer goods and services. Take action to reduce waste, to reuse products where possible and to recycle when possible.

• Dynamic pricing mechanisms are being introduced to encourage consumers to adapt their consumption for reasons of environmental protection. Consumers should be called upon to both be adaptable and consider both long-term and short-term benefits of these pricing methods.


Dynamic Pricing – Can consumers achieve the benefits they expect FGG

PrivacyThe right to privacy particularly as it applies to personal information.The responsibility to know how information will be used and to divulge personal information when appropriate.

• Determine individually what personal information is of concern to you.

• Read Privacy Policy Statements for purchases where amount is significant and risk is high of personal information affecting price to determine the uses of your personal information.

• Consider asking businesses to remove your personal information according to their policies if you have concerns.

Standards DevelopersGeneral A standard, developed by an organization such as ISO could

include:• Sourcing of data• Transparency• Validity of Data• Privacy Issues• Features of Local Law (e.g., privacy, discrimination, anti-

competition)• Advertising• Pricing methodologies and processes• Data Retention and Related Processes• Dispute Mechanisms• Marketing Synchronization

SafetyThe right to be protected against goods or services that are hazardous to health and life.The responsibility to read instructions and take precautions. To take action to choose safety equipment, use products as instructed and teach safety to childrenInformationThe right to be given the facts needed to make an informed choice, to be protected against misleading advertising or labelling.The responsibility to search out and use available information. To take action to read and follow labels and research before purchase.

It is important to consumers that they are aware of pricing methods, that they are in use, and how applied, particularly when using personal information or information targeting them. They need to know the implications.


Having standards helps to better define what consumers should look at to determine the most qualified or trustworthy merchants. Consumers not only choose goods, but they also choose sellers. Recognizable criteria for distinguishing competing sellers facilitates competition and choice.


Dynamic Pricing – Can consumers achieve the benefits they expect FGF


Standards developers need to take particular care that consumer representatives will be independent, highly capable and

interest in participating, as are business and government representatives.


The inclusion of retention and attachment of algorithms to the actual transaction would be key to redress. Any complaint could be verified/tested.They can suggest standards of proof for after purchase price adjustments, rather than just chargebacks. Denote details on returns based on price complaints, for instance price matching.Note how to deal with complaints about differences in pricing geographically or between bricks and mortar and online.


Consumers don’t typically consider the questions to ask to compare pricing methodologies. A standard could provide those questions, and answers. This is similar to choosing among search engines, some of which offer greater or lesser privacy.


Standards organizations might look at the successes and failures of dynamic pricing approaches to nudging consumers toward behaviour in pursuit of public policy goals to help governments better understand the methods that work most consistently and to evaluate risk factors.


Consider involvement in upcoming efforts on an ISO standard based on Privacy By Design, ensuring that such protection for use in pricing is incorporated into this standard.

BusinessSafetyThe right to be protected against goods or services that are hazardous to health and life.The responsibility to read instructions and take precautions. To take action to choose safety equipment, use products as instructed and teach safety to children

resourced through connection to expert communities with an


Dynamic Pricing – Can consumers achieve the benefits they expect FG9

InformationThe right to be given the facts needed to make an informed choice, to be protected against misleading advertising or labelling.The responsibility to search out and use available information. To take action to read and follow labels and research before purchase.

For organizations that want to compete on transparency of pricing:

• Note that you are using dynamic pricing.• Tell buyers roughly the method, and

information used, and what you know about them.

• Communicate more clearly to in store consumers price matching options; don’t waste consumers’ time


• Make choice of pricing methods available to consumers. At least make known that dynamic pricing is in effect and the information that it is based on.

• Ensure any reference prices are current.• Make durable price offers, permitting

consumers a reasonable opportunity to shop around.

• Allow reasonable volume pricing.RepresentationThe right to express consumer interests in the making of decisions.The responsibility to make opinions known. To take action to join an association such as the Consumers Council to make your voice heard and to encourage others to participate.

• Allow consumers to provide input to the ways in which they would like their personal information to be used.

• Look to consumer groups for advice.


• Preserve algorithms with transactions for audit and tracking, where consumer protection and market-share authorities may need access.

• Write algorithms in an auditable way with intent and effect apparent


• Consumers need to be educated about the pricing methods.

• Explain implications of such pricing in a meaningful and effective way – involve your marketing, training and graphic design departments.


• Because dynamic pricing models are increasingly being considered for use to ‘nudge” consumer behaviour to achieve important public policy goals related to environmental protection and affecting consumers’ historically available choices, it is important that these models be well-tested in their specific use-cases before being deployed at full scale to ensure they can achieve policy goals, which include acceptance among consumers, to avoid any significant unintended consequences.


Dynamic Pricing – Can consumers achieve the benefits they expect FG=


• Follow the spirit of PIPEDA regarding informed consent, not the lowest level of adherence, particularly if the organization states anywhere that the privacy of their customers is important to them.

• Re-title categories in user-centric voice.• Make more clear at time of collecting personal

information when it will be used for dynamic pricing.

• Explain where personal information may be used to match with anonymized information to create a better personal view of an individual for the purposes of the merchant.

RegulatorsSafetyThe right to be protected against goods or services that are hazardous to health and life.The responsibility to read instructions and take precautions. To take action to choose safety equipment, use products as instructed and teach safety to childrenInformationThe right to be given the facts needed to make an informed choice, to be protected against misleading advertising or labelling.The responsibility to search out and use available information. To take action to read and follow labels and research before purchase.

• Consider requiring the public disclosure of pricing based on anything related to demographics, individual behaviour or personal information.

• Advertising guidelines should be updated to provide guidance on marketing/advertising for products with individualized pricing.


• Enforcement: Ensure that MSRP when made available is not abused. Fair and honest reference prices, produced with a defensible method, should only be offered for the purpose of price comparison. How a reference price is determined should be explained to the consumer and be independently verifiable if necessary.


• Increased support for, solicitation and collaboration with, consumer groups is key to representation. They can aggregate and distill issues in an informed, independent and objective way to determine issues truly affecting consumers.


Dynamic Pricing – Can consumers achieve the benefits they expect FG>


• Both the Competition Bureau and the Office of the Privacy Commissioner should consider a more structured enforcement regime, investigating retailers on a routine basis.

• Consider the models of compliance and enforcement in other marketplaces, possibly the commodities marketplace. Such systems are increasingly similar to retail, as retail bases prices on individual information and requires complex knowledge and often uses opaque pricing algorithms.

Consumer EducationThe right to acquire the knowledge and skills necessary to be an informed consumer.The responsibility to take advantage of consumer education opportunities. Take action by attending seminars and workshops, work to ensure consumer education takes place in schools.Standards provide a degree of education.

• Determine those independent consumer groups that will seek to understand consumer behaviour and and educational needs and fund them directly to do so.


• Regulators may be supervising dynamic pricing schemes created to address public policy objectives. Regulators should take responsibility that these methods are effective and seek, within their scope of responsibility, to make sure possibly adverse but unintended consequences for vulnerable consumers are well-known or offset as part of the pricing design.


Dynamic Pricing – Can consumers achieve the benefits they expect FG?


• Privacy regulators need to more rigorously enforce the concept of meaningful consent.

• Privacy regulators should consider amending PIPEDA to require clearer indication of the use of information in pricing and tie directly specific information into specific pricing purposes, as consumers will give up privacy for marketing but are less willing to accept pricing models that work to their disadvantage.

• Recommend provision of a clear grid of purpose and details of personal information when used for pricing – an issue more sensitive to many consumers than other marketing and service related purposes.

• Consider an initiative to review regulations with a view to determining how they relate to price-setting and to develop specific guidelines. There is a question about whether price offers might be offered on two tracks, both of which need to be defined. One based on personal offers and one based on anonymous offers. (Derives from the notion of “right to be forgotten”, which is really a right to be unknown ahead of a purchase when the purchase doesn’t involve a seller extending credit.)

Dynamic Pricing – Can consumers achieve the benefits they expect FG@

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Dynamic Pricing – Can consumers achieve the benefits they expect FF@

VIIIAppendices

AppendixI:PublicInterestNetworkQuestionnaire 117AppendixII:FocusGroups 119AppendixIII:OnlineSurveyQuestions 133AppendixIV:KeyInformants 135AppendixV:RegulatoryInformation 140

Dynamic Pricing – Can consumers achieve the benefits they expect FFC

AppendixI:PublicInterestNetworkQuesFonnaire

|PINQuesFonnaireTheConsumersCouncilofCanada’sPublicInterestNetwork(PIN)wasconsultedinthe

initialandEinalstagesofthisresearch.TheEirstquestionnairewastoidentifyissuestobeexploredandprovideinputtothedevelopmentofthefocusgroupdiscussionguide,keyinformantquestioning,andonlinesurveyquestions.Thesecondwastoobtainviewsonpotentialsolutions.

|PINOneDynamicPricing-Issues&Insights

Q1.Whatdoyouconsidertobedynamicpricing?Pleasegivedetailedexamples,andifpossible,thenameofthebusiness.

Q2.Foranyexamplesyounoted,whatwouldyouconsidertobetheBENEFIT,ifany,toconsumers?

Q3.Foranyexamplesyounoted,whatwouldyouconsidertobetheHARM,ifany,toconsumers?

Q4.Areyouawareofanydynamicpricingpractices,incorporatingpersonalizedinformation?Ifso,pleasegivedetails.

Q5.Whatconcernswouldyouhaveabouttheuseofaconsumerspersonalinformationorshoppingbehavioursindeterminingpricestheyareofferedbybusiness?

Q6.Howcanbusinessesbemoretransparentintheiruseofdynamicpricing?

Q7.Whatcanconsumersdotoprotectthemselvesfromharmorexploitationfromdynamicpricing?

Q8.Whatgovernmentand/orregulatorsdointhewayoflegislation,regulationorenforcementtoensureconsumerprotectioninthisarea?

Consumers Council of Canada Appendix I: Public Interest Network Questionnaire

Dynamic Pricing – Can consumers achieve the benefits they expect FFD

Q9.ThankyoufortakingthetimetoEilloutthissurvey.Ifyouhaveanyotherthoughtspleasetakeadvantageoftheblankspacebelow.

|PINTwoQuestionOneWheregeneraldemographicinformation(e.g.,wealthierneighbourhoods,olderor

youngerneighbourhoods)isusedtoprovidedifferingpricesfordifferentindividuals,howcanthisbemademoretransparenttoconsumers?Foranyexamplesyouprovide,pleasenoteanyrelevantindustryorproductinformation.

QuestionTwoWherepersonal(private)information(e.g.,purchasehistory/behaviour,loyaltyprogram

preferences,browsinghistory)isusedtoprovidedifferingpricesfordifferentindividuals(e.g.,charginghigherpricestolesspriceconsciousconsumers),howcanthisbemademoretransparenttoaconsumer?Foranyexamplesyouprovide,pleasenoteanyrelevantindustryorproductinformation.

QuestionThreeWherepersonalinformationisusedtodeterminethepriceofferedtoa

consumer,howcannotiEicationand/orPrivacyPolicyStatementsbemodiEied,orothermethodsemployed,tomakeaconsumer'sconsentfortheuseoftheirpersonalinformationmoreapparentandmeaningful?Foranyexamplesyouprovide,pleasenoteanyrelevantindustryorproductinformation.

QuestionFourIfyouhaveanyotherthoughtspleasetakeadvantageoftheblankspacebelow.

Dynamic Pricing – Can consumers achieve the benefits they expect FFE

AppendixII:FocusGroups

|DynamicPricingDiscussionGuideJanuary2017

EnvironicsResearchGroupLimitedFocusGroupsonDynamicPricingConsumers’CouncilofCanadaDiscussionagenda

1. Introductions(10minutes)

Welcometothegroup.Wewanttohearyouropinions.Feelfreetoagreeordisagree.Evenifyouarejustonepersonherethattakesacertainpointofview,youcouldrepresentmanyotherpeoplewhofeelthesamewayasyoudo.

Youdon’thavetodirectallyourcommentstome;youcanexchangeideasandargumentswitheachothertoo.

Youarebeingtapedandobservedtohelpmewritemyreport,butletmeassureyouthatwhatyousayhereistotallyconEidential.Weareinterestedinwhatyouhavetosayasagroupandnothingyousaywillbeattributedtoyoupersonally.

Thehost/hostesswillpayyouyourincentivesattheendofthesession.

Let’sgoaroundthetablesothateachofyoucantellusyournameandalittlebitaboutyourself,suchaswhatsortofworkyoudoandwholiveswithyouinyourhouseandwhatwouldbetwothingsyoumostliketoshopfor–betheyproductsorservices.

2.0 Dynamicpricing–initialthoughtsandquestionnaire(20minutes)

Asyoumayhaveguessedfromthequestionsweaskedyouwhenweinvitedyoutothissessionwearegoingtobediscussingdynamicpricing,butrestassuredwewillexplainitin

Consumers Council of Canada Appendix II: Focus Groups

Dynamic Pricing – Can consumers achieve the benefits they expect F9G

moredetailaswegoalong.

Dynamicpricing,isapricingstrategyinwhichbusinessessetElexiblepricesforproductsorservices,alsoreferredtoassurgepricing,demandpricing,ortime-basedpricing,amongothers.Particularlywhensellingonline,businessescanchangepricesquicklyandoftenbasedonmanyfactorsincluding:

competitorpricing,supplyanddemand,timeofdayoryear,stockonhand,personalinformationorattributes,and

otherexternalfactorsinthemarket.

Dynamicpricingisacommonpracticeinseveralindustriessuchas:hospitality,travel,entertainment,publictransportelectricity,publictransport,andretail.

Differentindustriesoftentakedifferentapproachestotheirdynamicpricing.Examplescanrangefromasimple20%couponforabook,orasimpleAmazonadjustmentofpricetomatchacompetitor,topayingtwoorthreetimesthenormaltaxifareduringsurgepricinginanUbertaxi.

WearedoingthisresearchonbehalfoftheConsumers’CouncilofCanadawhichadvocatesforconsumers.ItworkstowardsanimprovedmarketplaceforconsumersinCanada.ItseeksanefEicient,equitable,effectiveandsafemarketplaceinwhichconsumersareabletoexercisetheirrightsandresponsibilities.

Weareinterestedinyourcommentsandthoughtsasconsumersondynamicpricing,whatisgoodorbadaboutitandhowitcanbeimprovedforthebeneEitofconsumers,andthemarketplace.

I’mgoingtohandoutasheetofpaperwithsomeEieldsIwantyoutoEillin.ThereisplacewhereIwantyoutolisttwoorthreeexamplesofdynamicpricingyouhaveexperienced,or

https://en.wikipedia.org/wiki/Pricing_strategies

https://en.wikipedia.org/wiki/Product_(business)

https://en.wikipedia.org/wiki/Supply_and_demand


Dynamic Pricing – Can consumers achieve the benefits they expect F9F

knowof.Pleasenotethenameofthecompanyandtheproductorservice,ifpossible,andaswellforeachnotewhatyouseewouldbethebeneEittoyou,oranotherconsumer.

Ialsowantyoutojotdownwhereindicatedwhatyourconcernsyoumayhavewhenitcomestothewholepracticeofdynamicpricing.

TakeEive(ten)minutesorsotocompletethis.

HANDOUTTHEFORM,GIVINGTHEGROUPFIVEMINUTESTOCOMPLETE

Let’sdiscusswhatpeoplewrotedown.Wewillbegoingintosomeoftheseinmoredetaillater,butlet’sworkaroundtheroomandgetdownontheElipchartthemainexamplesandsomeofthebeneEits.

MODERATORTOLISTONAFLIPCHART

Let’sbeginwithYOUandwhatisoneyoulistedasanexample,anditsbeneEit.AnyoneelsehavethesameoneandcanaddtothebeneEits?

MODERATORWORKSAROUNDTHEROOMGETTINGOUTONTOTHEFLIPCHARTTHEVARIOUSTYPESOFDYNAMICPRICINGANDTHEBENEFITS.ITWILLGIVETHOSEINTHEROOMANUNDERSTANDINGOFABROADERRANGEOFTHEMORECOMMONEXAMPLES.

Whatconcernsdidanyonehaveaboutdynamicpricingingeneral,oranyspeciEicexamples?Whatdidyoueachwrite?Let’sgetthoseoutontotheElipchart.

Isthereanythinglistedbysomeoneelsethatsurprisesyou,andifsowhy?

3.0 Discussiononspecicictypesandexamplesofdynamicpricing(70minutes)

Forthepurposesofthisdiscussionwearegoingtogroupdynamicpricingintotwocategories.Keepinmindthattherearemanywaystocategorizedynamicpricing,soweareusingthesetwocategoriessolelythepurposeofthissession:

A. Revenuemanagement(supplyanddemand)


Dynamic Pricing – Can consumers achieve the benefits they expect F99

B. Rulesbased(conditionalandEixed)

Wewilldescribetheseinmoredetailinaminute.

Foreachofthesecategorieswearegoingtoaskyouthefollowingseriesofquestionsbasedonexampleswewillsupply,andperhapssomeoftheexamplesyouhavegivenandwhichwehaveputupontheElipchart.

1. WhatdoyouthinkarethebeneEitstoconsumers?2. Wheredoyouthinkbusinessescanexploitconsumerswiththistypeofpricing?3. Whatdoyouthinkbusinessescandotoprotectconsumers?4. Whatdoyouthinkconsumerscandotoprotectthemselves?

Let’sgothroughthesetwobroadcategoriesofdynamicpricingseparately,goingthroughthefourquestionsforeach.ForeachcategoryIwillreadoutabroaddeEinitionandgiveacoupleofexamples.AndthenwewillgoaroundtheroomincorporatingifrelevantsomeoftheexampleswesetoutontheElipchart.

RevenueManagement:UnderRevenueManagementdynamicpricingcustomersmaypaydifferentamountsfor

thesameitem,basedprimarilyonsupplyanddemandatthetimeofpurchase.Theairlineindustryhasbeendoingthisforroughly20years,withcruiseships,hotelsandcarrentalslaterjumpingin.

Hereareacoupleofexamples:

1. Exampleone:Airlinetickets,andhotelrooms,canbedifferentpricesondifferentdays,andoftencheapestifbookedearlyoratthelastminute.

2. Exampletwo:It’sNewYearsEveandtherateforanUbercabis3timesthestandardfarebecausedemandissohigh.Itmaybeonly1½or2timesthefareacrossthecityorjustafewkilometresaway.Thisiscalledsurgepricing.Iftoomanypeoplewantacabatanygiventime,thepricegoesupenoughtoreducethedemandtoroughlythenumberoftaxi’savailable.

NowforrevenuemanagementdynamicpricingIamgoingtogothroughthosequestionsIjustmentioned.YoumaywanttoreferbacktosomeoftheexamplesyouhadmeputupontheElipchartearlier.


Dynamic Pricing – Can consumers achieve the benefits they expect F9=

1. WhatdoyouthinkarethebeneEitstoconsumers?

2. Wheredoyouthinkbusinessescanexploitconsumerswiththistypeofpricing?

3. Whatdoyouthinkbusinessescandotoprotectconsumers?

4. Whatdoyouthinkconsumerscandotoprotectthemselves?

Isthereanythingelseyouwouldliketoaddregardingrevenuemanagementdynamicpricing?

Andnowforthesecondbroadcategoryofdynamicpricing:

Rulesbased–conditionalandcixedrules:Underrulesbaseddynamicpricing,thepriceforaproductorservicechangesbasedon

certainpre-determinedfactors.ThesefactorscanbeEixed(timeofday,dayofweek,season,ageofconsumer,studentsstatus),orvariable(whatacompetitorisdoingwiththeirpricing,orifthefoodisnearingitsbestbeforedate).Forexamplerestaurantindustryhasusedthisformofpricingforits“earlybird”specials.EventhoughdemandmaynotbethereonagivenMonday,the“earlybird”specialpricewillstillbeoffered..

Hereareacoupleofexamples:

1. Exampleone:BlueJaysticketsaremoreexpensiveforCanadaDayandthelastdayoftheseason,thanforamidsummerweekdaygame.

2. Exampletwo:Amazonchangesitpricesformanyofitsproducts,sometimesmanytimesaday,basedonitsanalysisofcompetitorspricing.

NowforrulesbaseddynamicpricingIamgoingtogothroughthosequestionsIjustmentioned.Youmaywanttoreferbacktosomeoftheexamplesyouhadmeputuponthe


Dynamic Pricing – Can consumers achieve the benefits they expect F9>

Elipchartearlier.

1. WhatdoyouthinkarethebeneEitstoconsumers?

2. Wheredoyouthinkbusinessescanexploitconsumerswiththistypeofpricing?

3. Whatdoyouthinkbusinessescandotoprotectconsumers?

4. Whatdoyouthinkconsumerscandotoprotectthemselves?

Isthereanythingelseyouwouldliketoaddregardingrulesbaseddynamicpricing?

UseofPersonalinformationtodynamicallychangepriceThereisanecdotalevidenceofpricingpractices,thatmaycauseaconsumertogetprice

thatisdifferentfromanotherconsumer,forwhichthereisnotobviousreasonmadecleartotheconsumer.Wewillgiveyousomeexamples,andwouldlikeknowforeachyourthoughtsonthebeneEitand/orconcernstoconsumers?Whatcanconsumersdotoprotectthemselvesinsuchcases?

MODERATORWILLREADEACHOFTHEFOURFOLLOWINGEXAMPLESANDASKTHEQUESTIONSNOTEDABOVEFOREACHEXAMPLE.

Exampleone:Atravelwebsiteuseditsknowledgeofitscustomers'demographicstochargecertaincustomersmoreforhotels.TheonlinetravelandbookingsitefoundthatuserswhobrowsedonMacdeviceswerewillingtopayupto30percentmoreforahotelthanWindowsusers.OrbitztookthatinformationandautomaticallysteeredthosemoreafEluentuserstomoreexpensiveoptions,leadingtohighercommissionsfortheleadandconversion.

ASKQUESTIONS

ExampleTwo:AnairlinechargedfrequentElyersupto$300moreforaticketthanthey

http://www.wsj.com/articles/SB10001424052702304458604577488822667325882

http://business.time.com/2012/05/21/delta-overcharged-frequent-flyers-for-weeks-was-that-legal/


Dynamic Pricing – Can consumers achieve the benefits they expect F9?

chargedaninfrequenttraveler.Thereasoning?Peoplewhotraveloftenareprobablydoingitoutofnecessity-forbusinesspurposes,mostlikely.ThesepeopleneedtoElyandarewilling(howeverbegrudgingly)topaymoretogettowheretheyneedtogo.

ASKQUESTIONS

ExampleThree:AtravelsiteusedbrowsercookiestodeterminewhetheraconsumerhadlookedatthesameElightmorethanonce,andifso,assumedagreaterinterestonthepartoftheconsumer,uppedtheprice.

ASKQUESTIONS

ExampleFour:Onecustomer,whowasincloseproximitytoaretailoutletlocation(basednopostalcode),sawalowerpriceforamachineonaretailer’swebsitethananothercustomerwholivedafewmilesfurtherfromthestore.Thereasoningwasthatifsomeoneisalreadyclosetothestore,theymaybeenticedtomakethequickdriveovertopickupwhatevertheyneedifthepriceislowenough.

ASKQUESTIONS

Thinkingaboutthesefourexamplestogether,whereabusinessisusingyourpersonalinformationtoofferspecialpricingtoyou,whatspeciEicallywouldyouwanttoensurethattheyareusingitproperlyandtoyourbeneEit,oratleastamutualbeneEit?

4.0 Otherdynamicpricingissues(20minutes)

Whatdoyoubelievegovernmentorregulatorscandotoresolveanyoftheissueswehavediscussed

Howcanconsumersusedynamicpricingtotheiradvantage?Canyougiveussomeexamples?

Let’sgoaroundthetableandgetyourEinalthoughtson:Whatyouhavelearnedhere?


Dynamic Pricing – Can consumers achieve the benefits they expect F9@

Whatyouwillormaydodifferentlygoingforward?Anythingthatparticularlysurprisedyouinthediscussion?

Whatdoyoueachthink?

EXPLAINANYFINALPROCEDURESANDTHANKTHEMFORTHEIRPARTICIPATION.

|TorontoParFcipantData

Name Sex EducaFon Age OccupaFon Income

KH F

CompletedPost

Secondary 66 Re-red Under$30K

BS F

CompletedPost

Secondary 21

SalesRepresenta-ve-

Nike $100-150K

VD F

CompletedPost

Secondary 40FinancialPlanner $60-80K

LB FSomepostSecondary 34

SocialWorker-schoolBoard $30-60K

AT MCompletedHighSchool 25 SecurityGuard $30-60K

BT MGraduateDegree 28 Ar-st $80-100K

TZ M

CompletedPost

secondary 32

ProposalWriter-

Transporta-on $80-100K

KC F

CompletedPost

Secondary 30Fundraiser-Charity $60-80K

RZ FCompletedHighSchool 33 Cashier-Retail Under$30K

OL F

CompletedPost

Secondary 59Project

Manager-Print $100-150K

SR FSomePostSecondary 33

Educator-PublicHealth $30-60K

LS M

CompletedPost

Secondary 44SeniorAnalyst-Government $150K+

JD1 MSomePostSecondary 20 Unemployed $150K+

JD2 MCompletedHighSchool 20 Unemployed Under$30K


Dynamic Pricing – Can consumers achieve the benefits they expect F9C

NameBrowseonlineto

purchase…Browsedonlinefortopurchaserecently

Purchasedrecently

KH Frequently

Concert-ckets,Touristajrac-ons,Livetheater

-ckets,Airline-ckets,Filmfes-val-ckets Yes

BS Frequently

Hotels/accommoda-on,Concert-ckets,Tourist

ajrac-ons,Spor-ngevents,Amusementpark-ckets,

Airline-ckets,Inter-citybusortrain-ckets,FilmFes-val

-ckets Yes

VD Frequently

Hotels/accommoda-on,Touristajrac-ons,Airline

-ckets,Inter-cityBusorTrain-ckets Yes

LB Frequently

Hotel/accommoda-on,Concert-ckets,Tourist

ajrac-ons,Spor-ngevents,Livetheater-ckets,Airline-ckets,Inter-citybusortrain-ckets,Filmfes-val-ckets Yes

AT Occasionally


ajrac-ons,Amusementpark-ckets Yes

BT Frequently

Hotel/Accommoda-on,Concert-ckets,Tourist

ajrac-ons,Spor-ngevents,Livetheater-ckets,

Amusementpark-ckets,Airline-ckets,Inter-citybusor

TrainTickets,Filmfes-val-ckets Yes

TZ Frequently

Hotels/accommoda-on,ConcertTickets,Touristajrac-ons,Livetheater

-ckets,Airline-ckets,Inter-citybusortrain-ckets Yes

KC Frequently

Hotels/accommoda-on,Concert-ckets,Livetheater-ckets,Amusementpark

-ckets,Airline-ckets,Inter-citybusortrain-ckets Yes

RZ Frequently Airline-ckets Yes


Dynamic Pricing – Can consumers achieve the benefits they expect F9D

OL Frequently

Hotels/accommoda-on,Concert-ckets,Touristajrac-ons,Livetheater-ckets,Amusementpark-ckets,Airline-ckets,Film

Fes-val-ckets Yes

SR Frequently

Hotels/accommoda-on,concert-ckets,Touristajrac-ons,Livetheater

-ckets,Airline-ckets,Inter-cityBusortrain-ckets,Film

Fes-val-ckets Yes

LS Occasionally

Concert-ckets,Touristajrac-ons,Spor-ngevents

Livetheater-ckets,Amusementpark-ckets,

Airline-ckets,Inter-cityBusortrain-ckets,FilmFes-val

-ckets Yes

JD1 Occasionally

Hotels/accommoda-on,Concert-ckets,Spor-ngevents,Airline-ckets Yes

JD2 OccasionallyHotels/accommoda-on,

Airline-ckets Yes

|MontrealParFcipantData

Name Sex EducaFon Age OccupaFon Income

JA FCompletedHighSchool 27 Cook Under$30K

GS MCompletedHighSchool 55

CustomerService $30-60K

SJ M

CompletedPost

secondary 63 Re-red $80-100K

NR FGraduatedegree 29 Controller $100-150K

SZ FGraduatedegree 23

SalesAssociateandBusiness

Owner Refused

MD F

CompletedPost

secondary 60 Re-redTeacher Refused


Dynamic Pricing – Can consumers achieve the benefits they expect F9E

SR FGraduatedegree 60 Lawyer $100-150K

PD FGraduatedegree 39

Opera-ons-RBC $80-100K

IK MGraduatedegree 35

LanguageInterpreter Under$30K

MG FGraduatedegree 47 Translator $60-80K

DH MTradeSchoolCer-ficate 42 Electrician $60-80K

NameBrowseonlineto

purchase…Browsedonlinefortopurchaserecently

Purchasedrecently

JA Occasionally

Livetheatre-ckets,Amusementpark-ckets,

Airline-ckets,Inter-cityBusorTrain-ckets Yes

GS Frequently


ajrac-ons,Spor-ngevents,Livetheatre-ckets,Airline-ckets,FilmFes-val-ckets Yes

SJ Frequently

Hotels/accommoda-on,Touristajrac-ons,Live

theatre-ckets,Amusementpark-ckets,Airline-ckets,Inter-cityBusorTrain-ckets Yes

NR Frequently


ajrac-ons,Spor-ngEvents,Livetheatre-ckets,Airline-ckets,Inter-cityBusorTrain-ckets,FilmFes-val-ckets Yes

SZ FrequentlyHotels/accommoda-on,

Spor-ngEvents,Airline-ckets Yes

MDOnlyonrareoccasions

Livetheatre-ckets,Airline-ckets Yes

SR Frequently

Hotels/accommoda-on,Touristajrac-ons,Airline

-ckets,Inter-cityBusorTrain-ckets Yes


Dynamic Pricing – Can consumers achieve the benefits they expect F=G

PD Frequently

Hotels/accommoda-on,Concert-ckets,Touristajrac-ons,Livetheatre-ckets,Amusementpark

-ckets,Airline-ckets,Inter-cityBusorTrain-ckets,Film

Fes-val-ckets Yes

IK Frequently


ajrac-ons,Spor-ngEvents,Livetheatre-ckets,

Amusementpark-ckets,Airline-ckets,Inter-cityBusorTrain-ckets,FilmFes-val

-ckets Yes

MG Frequently

Hotels/accommoda-on,Concert-ckets,Spor-ngEvents,Airline-ckets Yes

DH FrequentlyHotels/accommoda-on,

Spor-ngEvents,Airline-ckets Yes

|FGNotableQuotaFonsGeneralAwareness:SpeciEiccommentsaboutgeneralawarenessincluded:

“Dynamicpricingconfusescustomers.Thereisreallynocorrectpriceanymore.Allpricingisbasedonmarketingtechniquestoconvinceshopperstheyaregettingadeal.”

“IfdemandissigniEicant,itcanpricepeopleoutofthemarket.”

“Ithinkifthepricingisnottransparenttheconsumerhasagreaterriskofpayingmorethantheyshould.”

“PricesEluctuatetoooften.Wearenotreallyconsultedinthisprocess.Consumersdon’tgetasayinthesepractices.”

“Forsubscriptionandloyaltyprograms,Ineedtospendatacertainthresholdthatmybudgetdoesn’toftenallow.”

“WhenpricesEluctuatesomuch,it’sappearsliketheretailerispricegougingthecustomer.”

“Whatinformationisbeingcollectedaboutmetoinformcompaniesaboutmyhabits?(Thisis)totallyunknown.”

“…youhavetowaituntilitbecomescheaperortrytoEinditattherighttimes.”


Dynamic Pricing – Can consumers achieve the benefits they expect F=F

RevenueManagementvsRulesbasedSpeciEiccommentsaboutyieldmanagementincluded:

“Supplyanddemandfactordoesn’tnecessarilymeanthatpriceswillalwaysgoup.”

“Ifyouarepreparedtowingitalittle,youcangetsomedeals.”

“Forahockeygame,youpaymoremoney(forhigh-demandgames).Alotofpeoplewanttobethere,butitmakesthemomentmoreinteresting.”

SpeciEiccommentsaboutrules-basedpricingincluded:“(Consumers)knowwhattoexpectatacertaintimeandcananticipatechangesiftheycanfollowthetrend.”

“Youcanjustplanforitbecauseyoucanseeitcoming.”

“Inthiscaseyouunderstandthechange.”

“IfIhaveanemergencyandIhavetobuysomething,thenthepricewillbereallyhigh.”

Example:VariableHotelPricingForAppleiOSvs.WindowsUsersParticipantcommentsincluded:

“Ifyouassumetheconsumerwantsthelowestprice,Appleuserswon’tbehappywiththis.Butifyouassumetheconsumerwantssomethingthatisthemostrelevanttotheirlife,thenthisisacustomizedshoppingexperience,andthat’sanadvantage.”

“There’sanassumptionthatthepricingisfairinthissituation...aretheybeingrippedoff?”

“What’sgoodforoneshouldbegoodforeverybody.Justbecauseyou’reusingadifferentdevice,whyshouldyoubepayingmore?It’snotright.”

Example:FrequentFlyerPricingWhereairlinesareseentochargefrequent6lyershigherpricesthanothers,basedonthe

rationalethatthosewho6lyoftenwillpayahigherpricebecausetheyneedtotravel,andoftenbecauseabusinesspaysforthepriceoftheirticket.Participantcommentsincluded:

“Ithinkthat’sthereality–itisn’talwaysaconcernfortheindividualwhoispayingandreimbursed.Butit’sstillinformationpeopleshouldknow–thatit’sapossibility.”

“It’snotfair,butthat’sbusiness.”

“It’snotfairbecausetheyaregettingthesameservice.They(thefrequentElyers)aregettingtakenadvantageofbecauseit’sanecessity.”

“Businesstravellersareoftensubsidizingeconomytravellers.Theywilloftentravellast-minute,sotheywillpayanyprice.PlustheygetbetterserviceandextrabeneEits.”

Example:IncreasingAirfaresfor“Interested”TravellersThisexamplepresentedthecaseofanairlineortravelsiteincreasingthepriceofaElight


Dynamic Pricing – Can consumers achieve the benefits they expect F=9

ifsomeonehaspreviouslycheckedtoseehowmuchtheElightcost.PreviouslyparticipantsidentiEiedincreasesinairfaresasanexampleofdynamicpricing,butassumeditwasacceptable,asitwassupplyanddemandbased.Participantcommentsincluded:

“…that’sexploitation.…it’stakingadvantageoftheconsumerbecausetheyareexpressinginterest.”

“Ithinkregulatorybodiesshouldsquashthingslikethis.”

“It’sdishonest.Theyknowyouwantit,sotheywillincreasethepriceuntilyousayno.”

Example:GeographicPricingThisexamplepresentedacasewhereaconsumerispresentedwithacheaperprice

onlinethansomeonewholivesfurtherawayfromabricksandmortarstoreoperatedbytheonlineretailsiteofthestoreoperator,basedonthepresumptionthatsomeonewholivesnearbywillbemoreenticedtogotothestoretopurchasethisitemifthepriceislow.Participantcommentsincluded:

“Ifacompanymakesanassumptionthatpeopleinthispostalcodewon’tbuysomething,anditwon’tgoonsaleortheyjustwon’tofferit,thatbecomesasigniEicantdisadvantagebasedonyourlocation.Youdidn’taskforthat,andit’snothingyoushouldbepunishedfor.”

Linguistic/CulturalDifferencesParticipantcommentsincluded:

“Therearesomepeoplewhodonothavesmartphonesorwhoareonline.AndIthinkaboutthat.”

“IntermsoftheInternet,theEluctuationofpricesandsalesismuchmoreaggressivethaninperson.Ifyougoto(aparticularstore)theysendyouane-mailfor40percentonlineonly.Well,thelittleladywhocan’ttravelbecauseshe’shandicapped,orshesendsherneighbourtothestore,shedoesn’tgether40percent….ItwouldbebetterifthediscountonlinewasalsomirroredinthestoresspeciEically.”

“Asasociety,itisnotresponsiblelettingthemarketfree….Weareconditioningandgivingourstampofapprovalforthosebehaviours,spendingmoneyonthosethings,ratherthaneducatingourselvesandcontributingtosociety.”

Dynamic Pricing – Can consumers achieve the benefits they expect F==

AppendixIII:OnlineSurveyQuesFonsAnonlinesurveyof600Canadians,generallyreElectingCanada’spopulationbyage,

genderandregion,wasusedtoassessthedegreetowhichconsumersassessedthefairnessof10dynamicpricingpractices,frompracticestheytypicallyknowandacceptthroughtonewerbig-dataanddemographics-basedpricingmethodologies,oftenemployedwithouttheknowledgeofconsumers.Theonlinesurveytoolusedmakesuseoftheinferreddemographicandlocation

informationtoemploystratiEiedsampling.Demographicsareinferredfromalargedatasetofrespondents’browserhistoryforage,genderandgeography,andmatchedagainstexistinggovernmentstatisticaldata.Inoursample,60%ofrespondentsweremale,40%female.However,biaswasremovedusingpost-stratiEicationweighting.Thisresultstypicallyinalowerrootmeansquareerror,andweightadjustedaccordingly.Thequestionswere:

1) Uber,intimesofhighdemand,increasespricestoriders(oftensigniEicantly)toincreasesupplyofdriversavailableandreducedemand.HowstronglydoyouAGREEorDISAGREEthatthismethodofpricingisFAIRtoconsumers?

2) Anautorepairshopgivesseniorcitizensa15%discountduringslowertimesoftheweek.HowstronglydoyouAGREEorDISAGREEthatthismethodofpricingisFAIRtoconsumers?

3) ThelocalMajorLeagueBaseballteamschargeshigherpricesforgamesagainstthebetter/leagueLEADINGandmorepopularteams.HowstronglydoyouAGREEorDISAGREEthatthismethodofpricingisFAIRtoconsumers?

4) AmazonthroughoutthedaymodiEiespricesbasedoncompetitorspricing.Differentcustomerscangetdifferentpriceswithinsecondsofoneanother.HowstronglydoyouAGREEorDISAGREEthatthismethodofpricingisFAIRtoconsumers?

5) ThewebsiteStubHuballowsindividualstoresellsportsandentertainmentticketsatwhateverpricethemarketwillbear.HowstronglydoyouAGREEorDISAGREEthatthismethodofpricingisFAIRtoconsumers?

6) ApharmacyprovidespricingdiscountsonavarietyofproductstoLoyaltyCardholders.HowstronglydoyouAGREEorDISAGREEthatthismethodofpricingisFAIRtoconsumers?

7) Atravelsitetrackswebbrowsercookies&raisespricesforthosevisitinga2ndor

Consumers Council of Canada Appendix III: Online Survey Questions

Dynamic Pricing – Can consumers achieve the benefits they expect F=>

3rdtime,assumingtheyhaveahigherinterestinpurchasingHowstronglydoyouAGREEorDISAGREEthatthismethodofpricingisFAIRtoconsumers?

8) Ahotelchainwillselltheidenticalroomatdifferentpricesontwodifferentsites-onealuxuryhotelwebsite,oneabudgetwebsite.HowstronglydoyouAGREEorDISAGREEthatthismethodofpricingisFAIRtoconsumers?

9) Aretailstorechargesahigherorlowerpricebasedonwhattheythinkaconsumerwillpay,basedontheindividualspurchasehistoryand/orpreferences.HowstronglydoyouAGREEorDISAGREEthatthismethodofpricingisFAIRtoconsumers?

10) Agrocerystoregivesanycustomeraquantitydiscountonmostproducts.HowstronglydoyouAGREEorDISAGREEthatthismethodofpricingisFAIRtoconsumers?

Dynamic Pricing – Can consumers achieve the benefits they expect F=?

AppendixIV:KeyInformants

|KeyInformantsElder,David:Lawyer,StikemanLLP.Toronto,Ontario.(RotmanConferenceonPrivacy)

Cook,Tracy:ExecutiveDirector,LicensingandStandards,CityofToronto.Toronto,Ontario.

Jenkin,Michael:FormerDirectorGeneralOfEiceofConsumerAffairs.Ottawa,Ontario)

Busch,Christoph:Professor.Osnabruck,Germany.

Austin,Lisa:UniversityofToronto.Toronto.Ontario(RotmanConferenceonPrivacy)

Woolford,Peter:Consultant.RetailCouncilofCanada.Toronto,Ontario.

Homan,Brent:Enforcement,OfEiceofthePrivacyCommissionerofCanada.Ottawa,Ontario.(Rotman

ConferenceonPrivacy)

Wootton,Tim:Owner,RoverParking.Toronto,Ontario

Reid,Laurent:PrivacyConsultant.Toronto,Ontario.

Wunderlich,John:InformationPrivacy&SecurityExpert.J.Wunderlich&Associates.Toronto,Ontario

|KeyInformantInterviewGuideQuesFonExcerptsDynamicPricingKeyInformantInterviewGuide(QuestionExcerpts)2016/17ConsumersCouncilofCanada

TheResearchProject:DynamicPricingThroughresearchbytheConsumersCouncilofCanadasupported/fundedbytheOfEiceof

ConsumerAffairswearelookingtoanswer:Whatarethefundamentaltypesofdynamicpricing?Whataretheprimaryreasonsfordynamicpricing?What,inthecontextofconsumerrights,areareasofpotentialharmorconcernfor

consumers?Whataretheresponsibilitiesofconsumersinmitigatingandmanagingthesepotential

harms?WhatisconsumerawarenessaroundbeneEitsandrisksofdynamicpricing?

Consumers Council of Canada Appendix IV: Key Informants

Dynamic Pricing – Can consumers achieve the benefits they expect F=@

Whatarethebarriersandissuesthatbusinessesfacecausingthemtofailinprotectingconsumersrights?Wherearetheareasinwhichbusinessmayexploit,intentionallyorotherwise,

consumers?Whatcanconsumersdotoprotecttheirrights?Whatcanbusinessesdotoensuretherightsofconsumers?PrimaryresearchalsoincludesFocusGroups,aCanada-wideonlinesurveyandtwoPIN

Surveys

ExplaintotheIntervieweeThisisaninterview,notasurvey.Itshouldtakeanywherefrom20to45minutes.WeareintheprocessofinterviewingseveralKeyInformants,includingacademic,

business,government,reviewsites,consumers,relatedexperts.Mostquestionsareopen-ended,butthereisastructuretotheinterview.Further

questionstobeaskedbasedontheanswers,oraskedforfurtherexplanationoncommentsmade.AddresstermsofconEidentiality.Explainwhowillaccesstheinformation.Ifany

statementistobedirectlyquoted,getthewrittenpermissionoftheinterviewee.Interviewislookingfortheinterviewee'sperspective,basedontheirexpertiseand

experienceoftheirprofession.Intheseinterviewslookingprimarilyforcertaininsightsintothefollowing:IssuesintheareaMarketplacedescriptorsCurrenttrendsExperiences(directandindirect)intheareaRecommendationsIntervieweesaretobeaskedifthereisanythingelsethattheythinktheywillbeableto

provideinthecourseoftheinterview,orotherindividualsweshouldconsiderinterviewing.DynamicPricingTypes,EnablersandDriversOUTLINE:InourresearchwefounddifferingwaystoclassifyDynamicPricing,andThis

willincludelookingatcategories,speciEictypes,andemergingandsomeofthedifferencesbetweentraditionalandemerging.AndisitthetypeofDynamicPricingorthewayinwhichitismoreaccurateorexploitativeorproEitable.InourresearchwehaveseenmanywaysoflistingandcategorizingDynamicPricing.

Whatdoyouseeasthebroadcategories?


Dynamic Pricing – Can consumers achieve the benefits they expect F=C

Prompt:RevenuemanagementRulesbased–conditionalandEixedPersonalizedDemandandsupplyYieldmanagementWhatdoyouseeasthevarioustypesofdynamicpricingwithinthosecategories?Prompt:Volumediscount,coupons,loyaltyprogramsAirlinesDemandondayCompetitorresponseAge/studentdiscountsAnticipateddemand–sportsticketsServicetimePeakpricing,penetrationpricing,uncertainmarket,segmentedpricing(location

normally)WhatdoyouseeasemergingDynamicPricingtypesorevolutions?Prompt:AirlinesandhotelsinparticularWaittomentionpersonalizedpricingbasedonpersonalinformationWhatarethedrivingforcesbehindtheseemergingDynamicPricings?WhatisenablingthesenewDynamicPricingmethodsormodels?HowarethesedifferentfromthemoretraditionalDynamicPricingdrivers/reasons.Howdoyouseethedifferencebetweenpriceandpricingtransparency?

BigDataandDynamicPricingThereisanecdotalevidenceofpricingpractices,thatmaycauseaconsumertogetprice

thatisdifferentfromanotherconsumer,forwhichthereisnotobviousreasonmadecleartotheconsumer.ForeacofthesewhatareyourthoughtsonthebeneEitand/orconcernstoconsumers?Whatcanconsumersdotoprotectthemselvesinsuchcases?Theseareanecdotal:areyouawareofrealexampleslikethese?ONE:Atravelwebsiteuseditsknowledgeofitscustomers'demographicstocharge

certaincustomersmoreforhotels.TheonlinetravelandbookingsitefoundthatuserswhobrowsedonMacdeviceswerewillingtopayupto30percentmoreforahotelthanWindowsusers.OrbitztookthatinformationandautomaticallysteeredthosemoreafEluentuserstomoreexpensiveoptions,leadingtohighercommissionsfortheleadandconversion.


Dynamic Pricing – Can consumers achieve the benefits they expect F=D

TWO:AnairlinechargedfrequentElyersupto$300moreforaticketthantheychargedaninfrequenttraveler.Thereasoning?Peoplewhotraveloftenareprobablydoingitoutofnecessity-forbusinesspurposes,mostlikely.ThesepeopleneedtoElyandarewilling(howeverbegrudgingly)topaymoretogettowheretheyneedtogo.THREE:Atravelsiteusedbrowsercookiestodeterminewhetheraconsumerhadlooked

atthesameElightmorethanonce,andifso,assumedagreaterinterestonthepartoftheconsumer,uppedtheprice.FOUR:Onecustomer,whowasincloseproximitytoaretailoutletlocation(basedno

postalcode),sawalowerpriceforamachineonaretailer’swebsitethananothercustomerwholivedafewmilesfurtherfromthestore.Thereasoningwasthatifsomeoneisalreadyclosetothestore,theymaybeenticedtomakethequickdriveovertopickupwhatevertheyneedifthepriceislowenough.Thinkingaboutthesefourexamplestogether,whereabusinessisusingaconsumers

personalinformationtoofferspecialpricing,whatspeciEicallywouldyouwanttoensurethattheyareusingitproperlyandtotheconsumersbeneEit,oratleastamutualbeneEit?

BenecitsandHarmsofDynamicPricingWeareaconsumergroupandwhileourfocusisontheconsumer,webelieveitisbest

servedbyawellfunctioningandimprovingmarketplace.Explaintheeightconsumerrights,explainingthemtotheintervieweefocusingonthosebolded:BasicNeeds;Safety;Information;Choice;Representation:Redress;Consumer

Education;HealthyEnvironment&PrivacyWefoundthatmostconsumerswhenaskedaboutDynamicPricingingeneraltendtolike

it.YoumentionedcertaincategoriesofDynamicPricing,lookingatthosecategoriesandspeciEictypeswhatdoyouseeasthebeneEittotheconsumer?PromptfortypestheymentionedinEirstsectionDoyoubelievethatconsumersseethetruebeneEitofDynamicPricingexamples?Wheredoyouseeconsumersconcernedaboutthis?Arethereconcernsthatyouyouthinkconsumersdonottypicallyrecognize?Arethereconcernsthatyouyouthinkconsumersrecognize,butignore?Promptfor:ConsumereagernessforadealInvestmentinthepurchaseprocessUberchangedtheirsurgepricingfromshowingthemultipliertonowshowingthe

estimatedamountofthefare–ofbeneEitorharmtoconsumer?ConsumerAwarenessConsumersareincreasinglyawareofpricedifferencesinstoresandchannels.Butwe

believetheyarenotasawareofpricingtransparency.Whatareyourthoughts?


Dynamic Pricing – Can consumers achieve the benefits they expect F=E

Explainpricetransparencyversuspricingtransparencydependingontheexperienceandunderstandingoftheinterviewee.Useyourjudgement.IstheindustryorthenatureoftheDynamicPricingrelevant?Ifso,how?

Whatcanconsumersdotoprotectthemselves?Whatcanconsumersdotoprotectthemselves?DoesitvarybynatureofDynamicPricing?Doesitvarybyindustry?

BarriersandIssuesforBusinessWhereDynamicPricingisconsideredgoodforconsumers,howcanitbedifEicultfor

businesstoimplement.–eg..seniorsorstudentdiscounts?Doconsumersabuseanyaspectsofdynamicpricing?Ifsohow?Dobusinessesfeelforcedintousingdynamicpricing?Ifsohow?Istechnologyabarrier?Isefforttomanage,particularlyinsmallerbusinesses,anissue?

WhatCanbeDonetoProtectConsumersWhatcanbusinessesdotoprotectconsumersandtheircustomers?HowcanbusinessesensuremoreDynamicPricingisbeneEicialtobothconsumersand

business?Whatcangovernmentdo?Islackofenforcementofprivacyandanti-competitivepricinglaws/regulationsanissue?Whatotherorganizationscanplayanimprovingpart?

Dynamic Pricing – Can consumers achieve the benefits they expect F>G

AppendixV:RegulatoryInformaFon

|CompeFFonEnforcementTheCompetitionBureauthroughtheCompetitionActhasfourcivilregimeprovisions,and

onecriminalregimeprovisiondealingwithpricing.Thoseunderthecivilregime,andpotentiallyapplicabletodynamicpricing,include:• falseormisleadingordinarysellingpricerepresentations(74.01(2)and74.01(3))

⁃ Intheeventthattherepresentedordinarypricereferstotheordinarypriceofsuppliersinthemarket,unlessthesesuppliershavesoldasubstantialvolumeoftheproductattherepresentedordinaryprice,oralternatively,thesesuppliershaveofferedtheproductforsaleingoodfaithattherepresentedordinaryprice,thispricecannotbereferencedastheordinaryprice,andanissueisraisedundersubsection74.01(2).

⁃ Intheeventthattherepresentedordinarypricereferstothesupplier'sordinaryprice,unlessthesupplierhassoldasubstantialvolumeoftheproductsattherepresentedordinaryprice,oralternatively,thesupplierhasofferedtheproductforsaleingoodfaithattherepresentedordinaryprice,thispricecannotbereferencedastheordinaryprice,andanissueisraisedundersubsection74.01(3).¹³⁰

• baitandswitchselling(74.04)⁃ Section74.04oftheCompetitionActisacivilprovision.Itprohibits"bait-and-switch"

sellingwhichoccurswhenaproductisadvertisedatabargainprice,butisnotavailableforsaleinreasonablequantities.Theprovisiondoesnotapplyiftheadvertisercanestablishthatthenon-availabilityoftheproductwasduetocircumstancesbeyonditscontrol,thequantityoftheproductobtainedwasreasonable,orthecustomerwasofferedaraincheckwhensupplieswereexhausted.¹³¹

• saleaboveadvertisedprice(74.05)⁃ Section74.05oftheCompetitionActisacivilprovision.Itprohibitsthesaleorrentofa

productatapricehigherthanitsadvertisedprice.Theprovisiondoesnotapplyiftheadvertisedpricewasamistakeandtheerrorwasimmediatelycorrected.¹³²

Thecriminalprovision.Section52,ageneralprovisionregardingfalseormisleadingrepresentationsthatmayleadtocriminalprosecution.

⁃ “52(1)Nopersonshall,forthepurposeofpromoting,directlyorindirectly,thesupplyoruseofaproductorforthepurposeofpromoting,directlyorindirectly,anybusinessinterest,byanymeanswhatever,knowinglyorrecklesslymakearepresentationtothepublicthatisfalseormisleadinginamaterialrespect.”¹³³

Certaineffortsatpricemaintenancemaydrawtheattentionofcompetitionenforcement.Pricemaintenancemayoccurwhenasupplierpreventsacustomerfromsellingaproductbelowaminimumpricebymeansofathreat,promiseoragreement.Itmayalsooccurwhenasupplierrefusestosupplyacustomerorotherwisediscriminatesagainstthembecauseoftheirlowpricingpolicy.Section76oftheCompetitionActdealswithpricemaintenance.FortheActtoapply,thefollowingrequirementsmustbemet:⁃ Asupplier,bymeansofathreat,apromiseoranagreement,inEluencesupward,or

Consumers Council of Canada Appendix V: Regulatory Information

Dynamic Pricing – Can consumers achieve the benefits they expect F>F

discouragesthereductionof,thepriceschargedoradvertisedbyanotherbusinessthatiseitheracustomerofthatsupplier,oracompetitor.

⁃ Asupplierrefusestosupplyaproductto,ordiscriminatesagainst,anotherpersonbecauseofthatotherperson'slowpricingpolicy;and/or

⁃ Anyperson,asaconditionofdoingbusinesswithasupplier,inducesthatsuppliertorefusetosupplyaproducttoanotherpersonbecauseofthatotherperson'slowpricingpolicy;and

⁃ Theconductdescribedabovehashad,ishavingorislikelytohaveanadverseeffectoncompetitioninamarket.¹³⁴

Competitionenforcementmayresultintheeventofabuseofdominantposition.TheabuseofdominanceprovisionintheCompetitionActmayapplywhenallofthefollowingelementsaremet:⁃ TheEirmorgroupofEirmshasmarketpower,generallydeEinedastheabilitytoset

pricesabovecompetitivelevels;⁃ TheEirmorgroupofEirmshasengagedinorisengaginginapracticeofanti-competitive

acts,suchasactsthatarepredatory,exclusionaryordisciplinary;and⁃ Thepracticeofanti-competitiveactshaspreventedorlessened,orislikelytopreventor

lessen,competitionsubstantially.Thiscouldhappenif,asaresultofthepracticeofanti-competitiveacts:⁃ pricesaresubstantiallyhigher;or⁃ productquality,choiceorinnovationaresubstantiallylower.

PenaltiesmayincludeanAdministrativeMonetaryPenalty.TheCompetitionBureaumakesitclearthat“regularpricecomparisonclaimshavea

powerfuleffect,becauseconsumersseekoutgooddeals.”¹³⁵Referencepricingiskeytoaconsumer’sdecisionaboutthevaluetohimorherofaproductorservice.Inearly2017,theCompetitionBureaufoundthatHBCengagedindeceptivemarketing

practicesbyofferingsleepsetsatgrosslyinElatedregularpricesandthenadvertisingdeepdiscountsontheseprices,suggestingsigniEicantdealstoconsumers.TheCompetitionActensuresthatretailersdonotenticeconsumersbymakingreferencetoaninElatedregular

pricewhenadvertisingsales.¹³⁶

|AdverFsingStandardsTheCanadianCodeofAdvertisingStandardsisCanada’sselfregulatory“authority”for

advertisers.TherearenospeciEicreferencestodynamicpricing,althoughthefollowingareasdohaveapplicability:AccuracyandClarityInassessingthetruthfulnessandaccuracyofamessage,advertisingclaimor

representationunderClause1oftheCodetheconcernisnotwiththeintentofthesenderorpreciselegalityofthepresentation.Ratherthefocusisonthemessage,claimorrepresentationasreceivedorperceived,i.e.,thegeneralimpressionconveyedbytheadvertisement.(a) Advertisementsmustnotcontain,ordirectlyorbyimplicationmake,inaccurate,

deceptiveorotherwisemisleadingclaims,statements,illustrationsorrepresentations.

http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/h_03210.html

http://www.newswire.ca/news-releases/competition-bureau-sues-hbc-over-alleged-deceptive-regular-price-claims-and-clearance-sales-614492263.html



Dynamic Pricing – Can consumers achieve the benefits they expect F>9

(b) Advertisementsmustnotomitrelevantinformationiftheomissionresultsinanadvertisementthatisdeceptiveormisleading.

(c) Allpertinentdetailsofanadvertisementmustbeclearlyandunderstandablystated.(d) Disclaimersandasteriskedorfootnotedinformationmustnotcontradictmore

prominentaspectsofthemessageandshouldbelocatedandpresentedinsuchamannerastobeclearlylegibleand/oraudible.

(e) Alladvertisingclaimsandrepresentationsmustbesupportedbycompetentandreliableevidence,whichtheadvertiserwilldisclosetoASCuponitsrequest.……

(f) TheadvertisermustbeclearlyidentiEiedintheadvertisement,exceptingthe

advertiserofa"teaseradvertisement"asthattermisdeEinedintheCode.¹³⁷

PriceClaims(a) Noadvertisementshallincludedeceptivepriceclaimsordiscounts,unrealisticprice

comparisonsorexaggeratedclaimsastoworthorvalue.“RegularPrice”,“SuggestedRetailPrice”,“Manufacturer’sListPrice”and“FairMarketValue”aredeceptivetermswhenusedbyanadvertisertoindicateasavings,unlesstheyrepresentpricesatwhich,inthemarketplacewheretheadvertisementappears,theadvertiseractuallysoldasubstantialvolumeoftheadvertisedproductorservicewithinareasonableperiodoftime(suchassixmonths)immediatelybeforeoraftermakingtherepresentationintheadvertisement;orofferedtheproductorserviceforsaleingoodfaithforasubstantialperiodoftime(suchassixmonths)immediatelybeforeoraftermakingtherepresentationintheadvertisement.

(b) Wherepricediscountsareoffered,qualifyingstatementssuchas“upto”,“XXoff”,etc.,mustbeineasilyreadabletype,incloseproximitytothepricesquotedand,wherepractical,legitimateregularpricesmustbeincluded.

(c) PricesquotedinadvertisementsinCanadianmedia,otherthaninCanadianfunds,

mustbesoidentiEied.¹³⁸

|PrivacyProtecFonOfthetwofederalprivacylaws,thePersonalInformationProtectionandElectronic

DocumentsAct(PIPEDA)isofrelevanceincommercialtransitionsrelatedtoconsumerspurchasingfromorganizationsinCanada.ThepurposeofPIPEDAissetoutinSection3:

ThepurposeofthisPartistoestablish,inanerainwhichtechnologyincreasinglyfacilitatesthecirculationandexchangeofinformation,rulestogovernthecollection,useanddisclosureofpersonalinformationinamannerthatrecognizestherightofprivacyofindividualswithrespecttotheirpersonalinformationandtheneedoforganizationstocollect,useordisclosepersonalinformationforpurposesthatareasonablepersonwouldconsiderappropriateinthecircumstances.¹³⁹

“Appropriate”purposesarefurtheroutlinedinSection5(3): Anorganizationmaycollect,useordisclosepersonalinformationonlyforpurposesthatareasonablepersonwouldconsiderareappropriateinthecircumstances.

http://www.adstandards.com/en/standards/canCodeOfAdStandards.aspx#interpretation


http://laws-lois.justice.gc.ca/eng/acts/P-8.6/page-1.html#h-4


Dynamic Pricing – Can consumers achieve the benefits they expect F>=

PIPEDAregulatestheuseofpersonalinformationincommercialtransactions.Scheduleoneappliesandeffectivelydescribesallrequirements,theparticularlyrelevantpartsinclude:

• Principle2–IdentifyingPurposes:⁃ ThepurposesforwhichpersonalinformationiscollectedshallbeidentiEiedby

theorganizationatorbeforethetimetheinformationiscollected.• Principle3–Consent:(Excerpts)

⁃ Theknowledgeandconsentoftheindividualarerequiredforthecollection,use,ordisclosureofpersonalinformation,exceptwhereinappropriate.

⁃ Theprinciplerequires“knowledgeandconsent”.Organizationsshallmakeareasonableefforttoensurethattheindividualisadvisedofthepurposesforwhichtheinformationwillbeused.Tomaketheconsentmeaningful,thepurposesmustbestatedinsuchamannerthattheindividualcanreasonablyunderstandhowtheinformationwillbeusedordisclosed.

⁃ Theformoftheconsentsoughtbytheorganizationmayvary,dependinguponthecircumstancesandthetypeofinformation.Indeterminingtheformofconsenttouse,organizationsshalltakeintoaccountthesensitivityoftheinformation.

⁃ Inobtainingconsent,thereasonableexpectationsoftheindividualarealsorelevant.

⁃ Consentshallnotbeobtainedthroughdeception.⁃ Thewayinwhichanorganizationseeksconsentmayvary,dependingonthe

circumstancesandthetypeofinformationcollected.Anorganizationshouldgenerallyseekexpressconsentwhentheinformationislikelytobeconsideredsensitive.Impliedconsentwouldgenerallybeappropriatewhentheinformationislesssensitive.

• Principle9–IndividualAccess:⁃ Uponrequest,anindividualshallbeinformedoftheexistence,use,anddisclosure

ofhisorherpersonalinformationandshallbegivenaccesstothatinformation.Anindividualshallbeabletochallengetheaccuracyandcompletenessoftheinformationandhaveitamendedasappropriate.

OneperspectiveofaCanadianprivacyexpertisthatfromAnnCavoukian,whoservedasInformationandPrivacyCommissionerofOntarioforthreetermsandisnowexecutivedirectorofthePrivacyandBigDataInstituteatRyersonUniversity.“Canadiansareprotectedbylawfrommisuseoftheirdata….Intermsofhowit’sactuallyenforced,it’sahugeworldonlineandtheresourcesofthePrivacyCommissionerofCanadaarevery

limited.”¹⁴⁰

|ProtecFonAgainstDiscriminaFonUndertheCanadianHumanRightsAct(1985),“theprohibitedgroundsofdiscrimination

arerace,nationalorethnicorigin,colour,religion,age,sex,sexualorientation,genderidentityorexpression,maritalstatus,familystatus,geneticcharacteristics,disabilityandconvictionforanoffenceforwhichapardonhasbeengrantedorinrespectofwhicharecordsuspensionhasbeenordered.”Twosectionsofthediscriminatorypracticesarerelevant:• Denyingsomeonegoods,services,facilitiesoraccommodation.• Providingsomeonegoods,services,facilitiesoraccommodationinawaythattreats

https://www.thestar.com/business/2016/11/26/retailers-use-of-dynamic-pricing-skyrockets.html


Dynamic Pricing – Can consumers achieve the benefits they expect F>>

themadverselyanddifferently.¹⁴¹

|ConsumerProtecFonThelanguageofprovinces’generalconsumerprotectionlaw,withrespecttoprices,false,

misleading,deceptiveorunconscionablerepresentationisfairlyconsistentacrossCanada,withtheexceptionofNovaScotialaw’sminimalist–somemightsayminimal–approach,particularlyasregardspriceoffers.Thisresearchdoesnotnorwasitintendedtoassesstheeffectivenessofprotectionamongprovinces.Also,judicialinterpretationsoftheselawswerenotconsideredbythisresearch.The

researcherswerenotlegalexpertsandthisreviewisintendedonlytoleadtoageneralunderstandingofthecontextbasedonprovinciallawofalegalpriceoffer.Onemayobservethattheprinciples-basedapproachofprovincialconsumerprotection

lawwithrespecttofairpricingcanmaketheassessment,pursuitordefenceofaalegalpositionwithrespecttothesematterstimeconsumingandcostly(relativetothenatureofmanykindsoftransactions).Theapproachappearstorestontheideaafairbasisforcompetitionbetweenbuyerandselleristheidealeconomicstate,withthelawaddressingmostlycompetitiveinefEiciencyordishonesty.Asaresultofthecomplexityandtimeconsumingnatureofresolvingunfairnessin

modestlyvaluedtransactions,civilprosecutioninthesemattersfrequentlydefaultstoclassaction.Also,Albertaprovidesforconsumergroups/associationsbeingabletopursueactionsonbehalfofcollectionsofindividualconsumers,butreducesthelikelihoodofsuchactionbycreatingacostsriskforplaintifforganizations.ThisresearchdidnotconsidertheextenttowhichconsumergroupsinAlbertamightuseorhaveusedthisprovision.However,theConsumersCouncilofCanadahasneverdoneso.Amongtheexamplesofwhatmostprovince’slawswouldconsiderfalse,misleadingor

deceptiverepresentationsarerepresentations:• aspeciEicpriceadvantageexists,ifitdoesnot.• arepresentationusingexaggeration,innuendoorambiguity.• arepresentationthatmisrepresentsthepurposeorintentoranysolicitationoforanycommunicationwithaconsumer.Merchantsandregulatorsmaywishtoconsiderwhetherpresentations(userinterfaceor

algorithmicmodel)fordeliveringpriceofferswhettheappetiteofapotentialbuyerbyimplyingapriceadvantagethatdoesnotexist,createsanambiguitywithregardtoreferenceprices,ormisrepresentsthepurposeorintentofanonlineretailer’swebsitetobeafreemarketwhenitissomethingelse.Anunconscionablerepresentationischaracterizedcommonlyinprovincialconsumer

protectionlawasexploitingdisability,illiteracy,ignoranceortheinabilitytounderstandanagreement.(InNewBrunswick,thelawspeciEicallysetsoutthattakingpriceadvantageofa



Dynamic Pricing – Can consumers achieve the benefits they expect F>?

consumerundertheundueinEluenceofalcoholisanoffence.)¹⁴²Consumerprotectionlawoftenprohibitsofferingapricethatgrosslyexceedsthepriceatwhichsimilargoodsorservicesarereadilyavailabletolikeconsumers,perhapsbasedontheconsumerbeingunabletoreceivemuchbeneEitfromtherepresentationsurroundingtheproduct,andsuchthataconsumermightenterintoaone-sidedagreementtopurchase.Itintendstoprotectconsumersfromcircumstanceswhereaconsumermightfeelunderpressuretobuy.Theseconditionsofrepresentationseemcomprehensiveinintentand,forbetteror

worse,appearopentointerpretation.ApriceoffermaybemadeonthebasisofaclaimofafEiliationorassociation.Anunfair

practiceisconsideredtoresultfromafalse,misleadingordeceptiverepresentation.Thiscouldincludethatthegoodsorserviceshavesponsorship,approval,performancecharacteristics,accessories,uses,ingredients,beneEitsorqualitiestheydonothave,orthatsupplierofthegoodsorserviceshassponsorship,approval,status,afEiliationorconnectionthepersondoesnothave.Anyorallofthesecharacteristicsmightbepartofadynamicallypresentedpriceoffer,

andneedtobeconsideredforaccuracyandclarityofpresentationaloneorincombinationsoasnottoleadtomisrepresentation.WhilepricegougingdoesnotnecessarilycontravenetheCompetitionAct,some

provinceshavelegislationthatprohibitstheretailsaleofproductsduringemergenciesat

priceshigherthanchargedbeforethesituation,notablyinOntario¹⁴³andAlberta.¹⁴⁴Theintroductioninsomeprovincesoflawsgoverningthepreservationofvaluein

rewardsprograms,ifexpandedouttoalltheprovinces,ischangingthedurabilityifnotthetangibilityofthisformofdiscounting,althoughconsumersstillmustrelyuponthegeneralprovisionsofconsumerprotectionagainstmisrepresentationastheyconsidertheinEluenceoftheseprogramsontheirpricedecisionsandattempttounderstandtheirvalue.Someprovincessetthereasonableboundsfordeviationfromaprice“estimate,”which

amountstoapre-salepriceoffer.Thevalueoftheseprotectionsisextinguishedassoonasaconsumeracceptsanofferoutsidetheseboundsandcompletesapurchase.So,forexample,inAlberta,a10percentincreasefroman“estimate”mayviolateconsumerprotectionlaw,butnotifaconsumeracceptsthehigherprice,anyway.Consumerprotectionlawsprotectmoreorlessexplicitlyconsumers’righttothe

expectationofthereasonableavailabilityofgoodsandservicestosupportaseller’spriceoffer.Thereisanexpectationthatwhereinventoryislimited,andthustheabilitytoobtainthegoodsandservicesattheofferpriceislimited,consumerswillbeinformedaspartoftheoffer.Consumersgenerallymustrely,however,ongeneralprotectionsaroundmisrepresentationwhensupplymaybeabundantorevenvirtuallyunlimitedinthecontextofapriceoffer.SpeciEicconsiderationisnotgiveninlawtopriceoffersthatcouldleadconsumerstoconcludesupplyislimitedwhenitisactuallyabundant,beyondthegeneral


Dynamic Pricing – Can consumers achieve the benefits they expect F>@

provisionsconcerningmisrepresentation.Quebeclawprohibitsthepresentationofa“false”referencepriceinthecontextofaprice

offer.Notablytheprovinceshavevariousapproachestoregulatingeventticketsales,

everythingfrompreventingresaleoftickets,restrictingresalepricestooriginalfacevalues,topermittingsecondarymarketssubjecttopricecontrols.

Dynamic Pricing – Can consumers achieve the benefits they expect F>C

Notes¹GarbarinoE,andS.MaxwellS..Consumerresponsetonorm-breakingpricingeventsine-commerce.JournalofBusinessResearch,2010,63(9):1066-1072.²http://whatis.techtarget.com/deEinition/dynamic-pricing³https://www.collinsdictionary.com/dictionary/english/dynamic-pricing⁴https://en.oxforddictionaries.com/deEinition/dynamic_pricing⁵https://www.business.com/articles/what-is-dynamic-pricing-and-how-does-it-affect-ecommerce/⁶https://en.oxforddictionaries.com/deEinition/big_data⁷PersonalInformationProtectionandElectronicsDocumentsAct.https://www.priv.gc.ca/en/privacy-topics/

privacy-laws-in-canada/the-personal-information-protection-and-electronic-documents-act-pipeda/pipeda-

compliance-help/pipeda-interpretation-bulletins/interpretations_02/⁸PersonalInformationProtectionandElectronicsDocumentsAct..https://www.priv.gc.ca/en/privacy-

topics/privacy-laws-in-canada/the-personal-information-protection-and-electronic-documents-act-pipeda/

pipeda-compliance-help/pipeda-interpretation-bulletins/interpretations_02/⁹https://en.wikipedia.org/wiki/John_Wanamaker

¹¹BasedonresultsofFocusGroupsconductedforthissurvey.¹²https://www.amazon.com/b?node=13270229011¹³Mehra,Amit,SubodhaKumar,andJagmohanRaju.2009.Competitivestrategiesforbrick-and-mortarstores

tocounter“showrooming”.ManagementScience¹⁴Mehra,Amit,SubodhaKumar,andJagmohanRaju.2009.Competitivestrategiesforbrick-and-mortarstores

tocounter“showrooming”.ManagementScience¹⁵Larson,Kara.CanYouUseDynamicPricing?.ArtsKnowledgeLLC¹⁶ZilliantLaunchesDynamicPricingEngine.http://www.prnewswire.com/news-releases/zilliant-launches-dynamic-pricing-engine-300376653.html(accessedDecember16,2016)¹⁷"IsUber’sSurge-PricinganExampleofHigh-TechGouging?-TheNewYorkTimes."https://

www.nytimes.com/2014/01/12/magazine/is-ubers-surge-pricing-an-example-of-high-tech-gouging.html?

_r=0¹⁸WatsonisanArtiEicialIntelligencesoftwareplatformtoassistbusinesswithdecisions.https://

www.ibm.com/watson/¹⁹Thequestions,detailedresponsesummariesandmorecomprehensiveexcerptsfromthePINsurveyare

includedinAppendixIofthisreport.²⁰Typicallyreferredtoasanindividualwhoreachestheiradultyearsintheearly21stcentury,typicallyborn

¹⁰Davis,MichaelM. GabrielTardeOnCommunicationandSocialIn>luence.SelectedPapers.2011

Consumers Council of Canada Notes

Dynamic Pricing – Can consumers achieve the benefits they expect F>D

afterthelate1970’s²¹Typicallyrefersthoseborninthe70’sand80’s²²"GROWINGE-COMMERCEINCANADA."CanadaPost.2017²³Smith,Aaron,andMonicaAnderson.PEWResearch.OnlineShoppingandE-Commerce(2016)²⁴ThereissomedebatethattheQuakershadEixedpricesonthebeliefthatallmenareequalunderGod.The

pricetagitself,thoughwasthatofJohnWanamaker,inPhiladelphia,anareaofsigniEicantQuakerpopulation.

TheInventionofthePriceTag|ExplorationsinAmericanHistory²⁵https://en.wikipedia.org/wiki/John_Wanamaker

²⁷Stephens,Doug.ConsumersCouncilofCanada,InTouchConsumerProtectionConference.DougStephensis

aretailfuturist,speakerandauthorofTheRetailRevivalandReengineeringRetail²⁸Stephens-Intouch²⁹Stephens-Intouch³⁰http://www.investopedia.com/terms/p/price_discrimination.asp³¹OECD,PriceDiscrimination-BackgroundnotebytheSecretariat,directorateforEinancialandenterprise

affairs,competitioncommittee.,November29,2016³²OECD³³http://www.economicsonline.co.uk/Business_economics/Price_discrimination.html³⁴U.S.Code:TitleComerceandTrade-MonopoliesandCombinationsinRestraintofTrade.

commerce.2001.VirginiaJournalofLawandTechnology.

³⁷ShowroomingandtheRiseoftheMobileAssistedShopper.ColumbiaBusinessSchool.2013https://

www8.gsb.columbia.edu/rtEiles/global%20brands/Showrooming_Rise_Mobile_Assisted_Shopper_Columbia-

Aimia_Sept2013.pdf³⁸Swedloff,Rick."RiskClassiEication'sBigData(R)evolution."ConnecticutInsuranceLawJournal,Vol.21,2014(1905).http://ssrn.com/paper=2566594³⁹Hacker,PhilippN,andBilyanaPetkova."ReiningintheBigPromiseofBigData:Transparency,Inequality,

andNewRegulatoryFrontiers."NorthwesternJournalofTechnologyandIntellectualProperty,Forthcoming(2016)doi:10.2139/ssrn.2773527.http://ssrn.com/paper=2773527⁴⁰Odlyzko,Andrew."Privacy,Economics,andPriceDiscriminationontheInternet."ICEC2003:FifthInternationalConferenceonElectronicCommerce,pp.355-366,N.Sadeh,ed.,ACM,2003(2003)doi:10.2139/ssrn.429762.http://ssrn.com/paper=429762⁴¹Odlyzko⁴²Acquisti,Alessandro.TheEconomicsofPersonalDataandtheEconomicsofPrivacy.OECD,December,2010⁴³Shiller,Benjamin,Waldfogel,Joel.Musicforasong:anempiricallookatuniformpricinganditsalternatives.

TheJournalofIndustrialEconomics,59(4):630–660,2011.⁴⁴Mikians,Jakub,LászlóGyarmati,VijayErramilli,andNikolaosLaoutaris."Crowd-assistedSearchforPrice

DiscriminationinE-commerce:FirstResults."InProceedingsoftheNinthACMConferenceonEmergingNetworkingExperimentsandTechnologies.2013⁴⁵Acquisti,Alessandro,LauraBrandimarte,andGeorgeLoewenstein."PrivacyandHumanBehaviorintheAge

²⁶Davis,MichaelM. GabrielTardeOnCommunicationandSocialIn>luence.SelectedPapers.2011

³⁵Weiss,RobertM.AndAjayK.Mehrotra.OnlineDynamicPricing:efAiciency,EquityandtheFutureofE-

³⁶Chintagunta,PradeepandRossi,Federico."PriceTransparencyandRetailPrices."WorkingPapers,TheInitiativeonGlobalMarkets,UniversityofChicago(2015).

https://timespelunking.wordpress.com/2012/11/12/the-invention-of-the-price-tag/

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Dynamic Pricing – Can consumers achieve the benefits they expect F>E

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