Would supermarkets’ use of digital price tags necessarily increase prices to the detriment of their customers?
Digital price tags in grocery stores like Kroger would be used to more swiftly facilitate price changes for items in response to demand. While this type of "dynamic pricing" may result in higher prices for groceries that are in high demand, it would also lead to a decrease in the price of those groceries where supply is greater than demand. The static-price alternative would result in stockouts and empty shelves.
Dynamic pricing is used in other industries such as hospitality and ride-sharing. For example, Uber surge pricing reflects high demand for rides relative to available drivers. It has been shown that higher ride prices during surge pricing elicit greater driver availability.
Dynamic pricing usually increases a company’s profitability, but it should be noted that the profit margins of grocery stores are relatively low. Also, more frequent price adjustments may erode consumers’ opinions of stores, but so could empty shelves.
