This post is in response to a question on Quora: Amazon changes the prices of their inventory based on what?:

We have been monitoring prices and movements on Amazon for the past 18 months while building a platform to help shoppers take advantage of this volatility. The quick answer to your question is that Amazon employs dynamic pricing algorithms to make the changes, so there is often no human involvement in the changes. That being said, we see numerous examples where the price was artificially raised, likely by a person, in the time before a product was going to hit the “Deal” listings. For example, a TV that is selling for $500 one day will be raised to $600 so that in a week or two, they can post it to the Daily Deals list at $500 and say it is $100 off. Sometimes we even see that the product lists on deal for a price above where it was just selling recently.
Aside from situations like Deals, a lot of the price movement is based on supply and demand, inventory, competitor pricing, 3rd party marketplace pricing, etc. Here are a couple of great examples that we have seen in beta testing: (for reference, our platform allows people to place bids for items on Amazon that will automatically purchase when the price drops)
– We had three bids placed for one item (a scooter). The price of the scooter fell low enough that it triggered all three bids. All purchases were made for our users at the low price. But what was amazing was that just three purchases was enough to engage the dynamic pricing algorithms to drive the price of the scooter back up, over where it had been on Amazon.
– Another interesting situation involved a pair of skis that Amazon clearly wanted to move from the warehouse. We had a user who bid $220 for a pair of skis when they were listed at $740. It took a few months, but at 1:30am one night, the price dropped dramatically and the purchase was made for our user at a price of $207! (It did not drop from 740–207 in one swoop but had been at about $400 before the last drop). By the time the user woke up and saw what had happened, the skis were out of stock on Amazon. This was clearly an effort to liquidate inventory and the price was set to fall until the skis were all sold.
We have seen a ton of interesting situations like those I described here. ShadowBid shows a price chart which gives you a great idea of how often some prices are changed. If you are interested in taking advantage of all this volatility and saving money, please download one of our products. And don’t forget to tell your friends! Thanks.

Here are a few pictures to illustrate what I have been saying: