![]() ![]() ![]() When the concert let out, Uber's prices surged: more specifically, the usual Uber price was raised by a multiple of "1.2 for 5 minutes, 1.3 for 5 minutes, 1.4 for 5 minutes, 1.5 for 15 minutes, and 1.8 for 5 minutes." Here's the pattern that emerged in the market: Part of the paper focuses on the evening of March 21, 2015, when Ariana Grande played a sold-out show at Madison Square Garden. Uber released a research paper in September 2015 called "The Effects of Uber's Surge Pricing: A Case Study" by Jonathan Hall, Cory Kendrick, and Chris Nosko. The current controversies over dynamic pricing often seem to bring up Uber ( NYSE: UBER), with its policy of having fares that rise during peak times. But there's now an active online market for reselling tickets for a lot of entertainment events, and prices in that market are going to affect last-minute supply and demand factors. Sure, sellers in the entertainment industry should be very cautious about a perception that they are jerking their customers around. If you don't want to go to Disneyland or a certain ski resort, then don't go. ![]() But, at the end of the day, it's hard to argue that these industries involve any great issue of fairness or justice. These examples are worthy of study: for example, one paper points out that if a seller only uses dynamic pricing to raise prices on busy days, but doesn't correspondingly lower prices to entice more people on non-busy days, it can end up losing revenue overall. Disneyland ( DIS) recently announced a plan to raise admissions prices by as much as 20% on days that are historically known to be busy while lowering them on other days. Louis Cardinals baseball team uses "a dynamic pricing program tied to its ticketing system in which the team changes ticket prices daily based on such factors as pitching match-ups, weather, team performance and ticket demand." Some ski resorts are adjusting prices based on demand and recent snowfall. Many of the most current examples seem to involve the entertainment industry. In " The Price Is Pliant: The Risks and Rewards of Dynamic Pricing" (January 15, 2016), Senthil Veeraraghavan looks at the choices that sellers face in considering dynamic pricing if they are taking their long-term relationships with customers into account. In "Frustrated by Surge Pricing? Here's How It Benefits You in the Long Run" (January 5, 2016), Ruben Lobel and Kaitlin Daniels discuss how it's important to see the whole picture - both higher prices at peak times, but also lower prices at other times. "The Promise - and Perils - of Dynamic Pricing" (February 23, 2016) offers an overview of the arguments with links to some research. The online Knowledge magazine published by the Wharton School at the University of Pennsylvania has been publishing some readable commentary on dynamic pricing. Information technology is enabling dynamic pricing to become more widespread in a number of contexts. To my knowledge, there was no outcry over this policy. On the other side, in 2012 certain Coca-Cola-owned vending machines in Spain were set to cut the price of certain lemonade drinks by as much as half on hot days. The machine will simply make this process automatic.'' However, the reaction from customers stopped the experiment in its tracks. Douglas Ivester, pointed out that demand for a cold drink can increase on hot days and said: "'So, it is fair that it should be more expensive. One classic example is that back in 1999, Coca-Cola ( KO) experimented with vending machines that would automatically raise the price on hot days. In other cases, dynamic pricing is more controversial. For example, when a movie theater charges more on a Friday or a Saturday night than for an afternoon matinee, or when a restaurant offers an early-bird dinner special, or when mass transit buses or trains offer a lower fare during off-peak hours, or when airlines charge more for a ticket ordered one day before the flight rather than three months before the flight, it doesn't raise many eyebrows. Most consumers are inured to dynamic pricing in certain contexts. Dynamic pricing refers to the practice of changing prices in real time depending on fluctuations in demand or supply. ![]()
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