Dynamic pricing based on personal data is not even a market, let alone a perfectly competitive one. Temporal dynamic pricing can mean almost anything, so might be ok (early bird lunch deal) or pure evil (bottled water now costs $100 because there is lead in the tap water).
Your evil case is not evil
The point of pricing water to that level is that it would induce other people who have access to bottled water to bring it to that market, as is desirable
You assume that other people can simply bring bottled water to market & compete with discoverability and access to customers with established players?
Or is your point that all people in a market with leaded water should be paying $100 for pure water because it is inherently worth that much per the market.
No, I assume that if anyone can bring bottled water to market, they should have a strong incentive to do so whenever there is a strong need for more of it.
But they (everybody) can't. Bringing bottled water to market requires a clean source, rights to acquire it, and a manufacture & distribution network. Plus retailers. As well, these things are often blocked to newcomers because of existing deals with big players.