Baffled by price variations while booking tickets, shopping online? It’s all about algorithms and timing

Do you remember the demand and supply graph that we were taught in school days? Well, it is just one aspect of how internet companies change their prices in real time using algorithms. If the demand of a product, service goes up, the prices will also shoot up.

There are multiple ways and reasons on how consumer internet companies change prices in real time with sophisticated algorithms.

Majority of the products and services online are subject to dynamic pricing.

For instance, if you are travelling, occupancy will also be considered as a major factor determining fare in travel, the number of buses or flights operating on the route are also considered.

If there is only one airline offering a flight at 7 am to a specific destination, naturally the prices will go up.

But, if there are other airlines too, offering similar services, competition will increase and the price will go down.

We all experience this in our daily lives too, when autos demand extra fare during peak hours or rainy days.

Even the vegetable vendor takes more money to sell something that is not seasonal.

While calling cabs also, dynamic pricing comes into play.

Ola and Uber resort to 'surge pricing,' which has two effects: people who can wait for a ride often decide to wait until the price falls; and drivers who are nearby go to that neighbourhood to make an extra buck. As supply increases, or demand falls, prices head back to the normal equilibrium.

Moreover, many platforms also have discriminatory pricing. For instance, an iPhone user is likely to pay more for a product than a desktop user.

So next time you order for anything online or book flights, make sure your timing and tools are right. Comparisons will also come in handy.

(Image: Thinkstock)