Final answer:
The pricing strategy employed by firms like Amazon is known as dynamic pricing strategy, enabling price adjustments in response to market conditions and demand. It is used in various market structures, including monopolistic competition, and can sometimes lead to predatory pricing, particularly in competitive industries like airlines.
Step-by-step explanation:
The pricing strategy used by companies such as Amazon, Uber, MTA, airlines, and professional sports organizations, which allows them to adjust prices based on factors like demand, competition, and market conditions, is the dynamic pricing strategy. Companies employ dynamic pricing to optimize their revenue, often leading to fierce competition among businesses. For instance, in a case of airline competition, a large airline might use dynamic pricing to temporarily lower their prices to compete with a new entrant, a move sometimes referred to as predatory pricing. This price reduction could potentially drive the new competitor out of the market, allowing the large airline to raise prices once the competition is eliminated.
These strategies are not only relevant for airlines but can be found across different markets and levels of competition. In monopolistically competitive markets, like the Mall of America with its diverse array of clothing stores, businesses also have to consider how to price their products, although they do not have the same level of control over prices as in more competitive or monopolistic scenarios. Nevertheless, dynamic pricing strategies are crucial across various business models and market types, from large-scale retailers like Amazon to individual, locally-owned stores.