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1. Step 1 of 3

   Dynamic pricing strategies

2. Step 2 of 3

   The dynamic price allows shifting the demand form one period to another period because of change in prices. When the available capacity diminishes, it moves the demands to other periods by change in the price. Companies may increase the price of goods when the demand is more in the market and don’t produce the goods at high demand. The demand of the product comes in regard with the seasonal demand patterns as the demand get increases seasonally with the variability of demand. The price variable is better in such type of scenarios.

3. Step 3 of 3

   Dynamic pricing strategy gives the profit benefit over the best fixed-price strategy are as follows:

   a) Available capacity decreases.

   They assume everything is equal, the lesser the production capacity and it is relative to average demand, and get the more profit from the dynamic pricing.

   b) Demand uncertainty increases.

   The advantage of dynamic pricing increases when the degree of demand uncertainty is more. It is measure by the coefficient of variation.

   c) Seasonality in demand pattern increases.

   When the demand of season level increases the profit of dynamic pricing also increases.

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