It is a pricing strategy in which businesses set flexible prices for products or service based on current market demands.
It is also called as Dynamic pricing, demand pricing, time based pricing.
Its main objective is to control the mismatch of demand and supply of goods and services by increasing the prices and therefore reducing the demand likelihood.
It is a common practice in several industries such as hospitality, travel, entertainment, retail, electricity, and public transport.
Why in news?
OLA and UBER, the private taxi operators started this method and many consumers complained of exorbitantly high charges even for small distances.
Railway Ministry started the surge pricing for premium trains such as Rajdhani, Duranto and Shatabadi.
What are some Issues arising out of it?
Taxi services charging more.
Railways may become unaffordable for poor people while making last minute reservations.
Many a times, seats in the trains have gone empty due to prices even higher than airplane.
On positive side, they provide higher earnings for the taxi drivers of and they provide better revenue to the railways.
There may be price fixing or algorithms manipulation by the industries to exploit customers and further there may be behavioural change of the service providers to respond only if surge pricing kicks in so that to get more money for less work.