Tariffs Could Make Controversial ‘Surveillance Pricing’ More Mainstream

Amid the Delta Air Lines dynamic pricing controversy, Wharton marketing professor Z. John Zhang argues that the approach is likely to become more widespread — especially in an environment shaped by rising tariffs and shifting consumer expectations.

In an interview with Knowledge at Wharton’s This Week in Business podcast, Zhang said consumers tend to be more tolerant of price increases when external factors — like import tariffs — are driving up costs across the board, the online business journal reported Tuesday (Aug. 5).

“A lot of companies take advantage of what’s going on with tariffs and raise their prices,” Zhang noted. “The reason is when tariffs go up, we as consumers tend to be more tolerant of price increases simply because we know that firms are struggling.”

Dynamic pricing, long used in industries such as airlines, hotels and car rentals, adjusts prices in real time based on demand. While not a new strategy, the recent economic backdrop gives firms more cover to test its boundaries. With competitors facing similar cost pressures, companies are less fearful of losing market share by raising prices, Zhang said.

Still, he cautioned that firms risk backlash if dynamic pricing is not transparent or fails to benefit consumers. He pointed to Wendy’s reported attempted rollout of “surge pricing,” which it later walked back after public outcry.

Zhang noted that dynamic pricing does not necessarily need to increase prices, instead advising firms that it may be wiser to start with a higher price and implement “dynamic discounting.”

Zhang’s commentary comes as Delta Air Lines’ plans to use artificial intelligence (AI) to implement dynamic pricing have sparked debate, with critics citing consumer privacy concerns and lawmakers warning against potential “surveillance pricing.” In July, the airline said on its earnings call that it was testing an AI system to tailor fares to individual customers. Shortly thereafter, the news drew public criticism from Sen. Mark Warner (D-Va.) at a Senate subcommittee hearing on AI.

Since then, in a letter from Delta Chief External Affairs Officer Peter Carter shared with PYMNTS, the airline stated, “There is no fare product Delta has ever used, is testing or plans to use that targets customers with individualized prices based on personal data.”