Week 7 Assignment – Case Study: Dynamic Pricing – Strategies for Enhancing Profitability
Overview
Dynamic pricing is a collection of pricing strategies used by firms and organization to enhance profits. You will begin by exploring pricing techniques that operate in the market in real time. Then you will explore how auctions are employed in the search to find the value of goods and services.
Instructions
Write a 5–7 page paper in which you:
- Compare and contrast surge versus congestion pricing. Provide a specific example of each currently in use.
- There are many types of auctions, each with strengths and weakness at uncovering the real price/value of an item. Compare and contrast how each of the following uncovers value and provide a specific example of how each uncovers value:
- The English auction and the Dutch auction.
- The sealed-bid first-price auction and the Vickery Auction.
- Auctions are widely used. Analyze an actual auction employed by each of the following:
- A state or federal government or an agency of a state or federal government.
- A for-profit business.
- For each, explain what type of auction is employed and how the auction solves the problem of finding the best price for the good or service.
- Read the Letter from Senator Warren to Fed on Wells Fargo FHC Status [PDF].
- Explain how an auction to sell the Wells Fargo consumer-facing banking division might be used to determine the value of the division.
- Include a recommendation on what type of auction might be used.
- Use five sources to support your writing, including one published within the last six months. Choose sources that are credible, relevant, and appropriate. Cite each source listed on your source page at least one time within your assignment.
Surge pricing and congestion pricing are two pricing strategies used to manage demand for goods and services. While both strategies are aimed at controlling the demand for a product or service, they differ in their approach and the situations in which they are used.
Surge pricing refers to a pricing model where the price of a product or service increases during periods of high demand. This is typically seen in the ride-sharing industry, where the cost of a ride can increase during busy times or during events like concerts or sports games. The aim of surge pricing is to incentivize drivers to become available during busy periods, helping to alleviate the demand for rides. For example, Uber uses surge pricing to manage demand during periods of high demand. If there are more riders requesting rides than drivers available, the price of a ride will increase until the demand and supply are balanced.
Congestion pricing, on the other hand, refers to a pricing model that aims to reduce traffic congestion in urban areas. This is done by charging a fee for entering certain areas or using certain roads during periods of high traffic. The aim of congestion pricing is to reduce the number of vehicles on the road, reducing traffic and improving air quality. An example of congestion pricing in use is the London Congestion Charge, which was introduced in 2003. The London Congestion Charge is a fee that drivers must pay to enter the central London area during peak hours. The fee is aimed at reducing traffic congestion in the city and improving air quality.
In summary, surge pricing and congestion pricing are two pricing models aimed at managing demand for goods and services. Surge pricing is typically used in the ride-sharing industry to manage demand during periods of high demand, while congestion pricing is used to reduce traffic congestion in urban areas by charging a fee for entering certain areas or using certain roads during periods of high traffic. Both strategies have their own unique benefits and drawbacks, and the choice between the two will depend on the specific situation and the goals of the organization implementing the pricing model.