As state legislative sessions wind down nationwide, bills targeting dynamic pricing threaten long-standing discounts that help Americans save money on everyday necessities. Lawmakers in New Jersey, Colorado, Michigan, New York City, and elsewhere introduced measures that would have swept up ordinary, decades-old pricing practices under misleading new labels. Before legislators inevitably return next session with similar proposals, it’s worth separating the rhetoric from the reality of how dynamic pricing actually works, and whom it helps.
Dynamic pricing is not new. When economic conditions shift and demand weakens, sellers lower prices to reduce inventory — a benefit to consumers that is similar to stores holding clearance sales to move products off the shelves. What has changed is speed and precision. Newer software incorporates more accurate market information and adjusts prices faster, a technological innovation that simply represents a new feature, not a threat. Dynamic pricing is proven to benefit lower-income families by lowering costs and widening the ability for people to purchase products they otherwise may not be able to afford.
Dynamic Pricing is Not “Surveillance” Pricing
Opponents of dynamic pricing – often those who don’t understand how it works or how broadly and historically it has been used – refer to it as “surveillance pricing” to scare people into thinking their privacy and interests are at risk. But the data inputs driving dynamic pricing are mundane commercial signals: inventory levels, competitor prices, time of day, regional demand, etc. Sellers have always adjusted prices based on these changes, right down to the kids selling lemonade who cross out “$2” to “$1” as a summer day cools down and they want to go play. No price is ever truly static.
More importantly, even when more personalized data is factored into pricing, it leads to widely popular offers. Loyalty rewards programs personalize prices to offer customers discounts for being a frequent shopper.
Dynamic Discounting Makes Markets More Competitive
One of dynamic pricing’s most powerful consumer benefits is the intensity of competition it generates. In retail, where a search can surface dozens of sellers for the same product, algorithms are constantly monitoring the market and adjusting prices to win the next sale. Amazon, Walmart, Best Buy, and many more all employ dynamic pricing tools to attract customers, and the beneficiary is the consumer in the middle of it.
Smaller online retailers, including sellers on Etsy and Shopify, use dynamic pricing to keep up with the market. Just as importantly, brick-and-mortar retailers have long utilized dynamic pricing. Mom-and-pop shops often offer customer loyalty programs as a way to compete against big-box stores.
Real World Affordability Wins
Dynamic pricing has helped Americans of all backgrounds. Apps like Too Good to Go use AI-powered discounting to let consumers purchase surplus food from local businesses at reduced prices — fighting food waste while providing affordable meals.
Grocers in particular have made dynamic discounting a key part of their business model going back hundreds of years. They have long marked down perishables at the end of each day, a primitive but effective form of dynamic discounting designed to move inventory before it spoils. Today’s electronic shelf labels and AI-assisted markdown systems, used by chains like Kroger and Stop & Shop, simply automated a decades-old practice. Shoppers willing to buy day-old bread or this week’s overstocked produce pay less, while stores reduce waste. The only difference is that the markdown sticker is now applied algorithmically rather than by a store clerk with a marker.
Retailers like CVS, Walgreens, and Costco have long used membership- and loyalty-tied dynamic pricing to extend discounts to repeat customers, offering lower prices on everything from prescriptions to household staples. This is functionally identical to the “frequent buyer” punch cards that delis and coffee shops have used for decades; this rewards system is just a digital version of the hole-punched paper of the past.
Gas stations represent perhaps the purest example of real-time, demand-responsive pricing in everyday American life. Prices change daily, sometimes hourly — based on regional demand, local competition, and wholesale costs. Far from being predatory, this constant repricing is what keeps gas stations across the street from each other locked in active price competition, often to the consumer’s benefit.
These are the real-world outcomes of algorithms that respond to data: not surveillance, but savings. In a dynamic pricing world, knowledge is power — and that power increasingly sits with the consumer.
Existing Law Already Protects Consumers from Abuse
Skeptics of pricing algorithms sometimes raise legitimate concerns: What about collusion? What about price discrimination based on protected characteristics? These are serious questions, and they already have serious answers in existing law. The Sherman Antitrust Act makes price fixing illegal regardless of whether it is coordinated by humans or software. Federal civil rights statutes already prohibit charging different prices based on national origin, race, or religion.
What existing law does not do, and what policymakers should resist doing, is treating all data-driven pricing as inherently harmful.
Getting It Wrong
Overregulation of dynamic pricing would harm small businesses that rely on pricing tools to compete with larger rivals. Shoppers who rely on dynamic discounting would lose the lower prices and milk that is about to expire. And the businesses best positioned to absorb the compliance burden — large, out-of-state or international operators who can structure around local restrictions — would gain ground on homegrown companies that can’t.
Dynamic pricing can be consistent with effective competition and good consumer outcomes, and when concerns arise, they’re best addressed through targeted interventions rather than blanket bans. That’s the right framework. Where specific, demonstrable harms exist, policymakers should address them directly. Don’t use a sledgehammer to crack a nut.
Image via Unsplash.