From Disney’s theme parks, to Uber’s rides and even college sporting events, surge pricing is a popular and rising model for business.

A dynamic pricing strategy -also called surge or peak pricing- raises prices when demand is high, and lowers them when demand dips below average. Demand-based pricing can also lift and dip depending upon a season, time of day or other consumption factors, and the belief of some is that it could give you more bang for your buck.

The Wall Street Journal reported that Disney is considering implementing peak prices when demand is at its highest at its theme parks to help manage overcrowding. The popularity of its Frozen and Star Wars franchises has increased the parks’ overwhelming demand. Economic experts say such a strategy opens up the market to more price-sensitive consumers on the lower end, and helps manage demand, effectively reducing crowds and time spent in lines, on the higher end.

 

Rafi Mohammed, a price strategy consultant and consultant, says peak pricing is an effective way to motivate consumer behavior. He says that Disney’s rollout of a potential peak pricing strategy has been successful because of its open communication with customers throughout the process. The change has been marketed as a way to give more consumers access to the park, since offseason prices would make it more affordable for lower-income consumers and higher prices would discourage overcrowding during the peak seasons.

 

Despite the potential benefits of modified behavior, consumers typically denounce the practice as a way to favor those with more disposable income. Those with higher incomes can arguably enjoy more flexibility when it comes to dates to visit the park. For example, peak pricing would be in effect during holiday times like Christmas when kids are off from school, while lower-income consumers could be restricted to less convenient times.

 

Uber started the trend with their surge pricing based on the travel hour booked for their car service. However their pricing was an example of how a lack of communication on pricing changes can lead to customer dissatisfaction. Uber started implementing surges but a lot of customers weren’t familiar with the pricing tier and just hit ‘yes’ on their app.

 

“Price can destroy reputation very quickly,” Mohammed says. “Any time you do a pricing change it’s important to have communication with customers.” Now Uber requires users to type in the amount of the surge to ensure they understand the price increase.

 

Some college sports teams have even experimented with dynamic pricing, pricing single-game tickets at a real-time market value with mixed reception. Northwestern University reported a 162% increase in revenue for its 2013 football game against Ohio State University after instituting surge pricing. On the other hand, the University of Michigan got rid of the practice for the 2015 season after receiving strong negative feedback from fans and decreased ticket sales.

 

Famous billionaire investor Warren Buffett dislikes the practice, urging attendees of his Berkshire Hathaway’s annual shareholder meeting to use home-renting platform Airbnb to avoid the raised rates at Omaha hotels last year, according to The Wall Street Journal.

 

Skeptics point out that the idea that adjusting prices to consumer demand is harmful and fails to take into account all the other factors involved with consumer habits.  Dynamic pricing focuses on the high-price aspect and can miss the benefits of the lower prices offered to consumers. Mohammed believes “You can activate dormant customers. If you can get customers to come who wouldn’t otherwise come, that’s a big slam dunk for you.”  Depending upon someone’s value of their own time, their preference may be to wait and pay less in order to access a theme park in February or pay more to attend a sold-out college football game on a Sunday in November.