Study Finds Half of Dynamic Pricing Changes in U.S. Were Price Cuts
A new analysis of 2025 price data challenges the assumption that dynamic pricing only raises costs, as retailers face growing consumer anger and legislative scrutiny over algorithmic and personalized pricing tools.
Dynamic pricing is often assumed to mean prices only go up, but a new analysis of U.S. price changes suggests otherwise. Decodo, a web data company, tracked price changes across products ranging from electronics to clothing and home improvement supplies in 2025 and found that about half of the changes it recorded were decreases, according to Gabriele Vitke, a senior product marketing manager. The finding runs counter to consumers' fears that algorithmic pricing tools exist solely to extract more money from shoppers.
The debate over how businesses set prices has grown louder as digital price tags replace paper ones in grocery aisles and artificial intelligence tools help companies predict how customers will respond to different prices. Terms like «dynamic pricing» and «surveillance pricing» are stirring anxiety on social media, where users wonder whether different people are getting different prices for the same product. Americans have grown accustomed to changing prices when booking flights, hotel rooms and rides, but the prospect of everyday spending shaped by algorithms they don't understand and personal data they may not realize they're sharing has touched a nerve.
«There are major tensions happening right now between who's really going to have the power with some of these algorithms and usage of bots and AI: the companies or the shopper,» said Katie Thomas, who leads an internal consumer behavior think tank at the management consulting firm Kearney.
Companies using the technology say some concerns stem from misconceptions about how their pricing tools work. Walmart CEO John Furner said in a blog post last month that digital price tags save workers' time and keep prices up to date. He said the labels aren't used to raise prices based on the weather, time of day or individual shopper. «We price the product, not the person,» Furner wrote. But companies aren't always transparent about the customer data they collect and how it's used, which has made consumers suspicious and led to speculation. For example, social media posts falsely imply that electronic shelf labels Walmart plans to put in all its U.S. stores scan shoppers' faces or cellphones to set individualized prices, Thomas said.
Lawmakers and regulators are taking action. Legislators in at least 30 states have considered pricing bills this year, including measures addressing algorithmic and personalized pricing, according to the National Conference of State Legislatures. The Federal Trade Commission has proposed an enforcement policy warning businesses that failing to disclose their use of personal data to set individualized prices could violate consumer protection law.
Dynamic pricing means adjusting prices in response to changing market conditions, including supply and demand. An airline that adjusts ticket prices as departures approach is using dynamic pricing. Uber's practice of lifting fares when demand outstrips the supply of available drivers, such as during rush hour, is a type of dynamic pricing known as surge pricing.
Digital price labels, long used in Europe and Asia, are drawing more attention as they spread to major U.S. retailers like Walmart and Whole Foods. Consumer advocates have argued that digital labels could eventually be used for surge pricing or personalized pricing, and labor unions have also opposed the technology. But the electronic shelf labels make frequent changes easier without necessarily leading to higher prices during periods of strong demand. Retailers typically update electronic shelf prices on a regular schedule, often weekly, because shoppers value consistency, said Asa Farquhar of Relex Solutions, a retail technology company. Researchers who tracked prices at an unnamed grocery chain found «virtually no surge pricing» after the labels were introduced. «Changing prices throughout the day, the way airlines or rideshare apps do, is exceedingly rare in grocery and general merchandise today,» Farquhar said.
Personalized pricing, also called surveillance pricing, draws on customer data to offer different prices and discounts based on locations, incomes, web-browsing habits and other information about individuals or groups of shoppers. It's unclear how widely businesses use personal information to customize prices. An FTC staff report released in January 2025 found that intermediaries offering tools that can tailor prices and promotions worked with at least 250 clients, including grocery and clothing retailers. Lawmakers in Maryland, New Jersey and Connecticut recently enacted restrictions on using shoppers' personal data to determine what they pay. The Maryland and New Jersey laws focus on groceries, with exceptions for certain loyalty discounts and other promotional offers. Connecticut's legislation covers a broader range of retail purchases. California prosecutors sued Target in 2022, alleging that the retailer's app displayed lower prices before shoppers entered stores and raised them once they were inside. Target agreed to a $5 million settlement and a ban on using so-called geofencing technology to increase prices. Target said the app functionality at issue was used to «provide guests with accurate pricing, which can vary across stores.»
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