Web Price Discrimination

The Wall Street Journal reports on research showing that firms charge people different prices depending on operating system and whether they used a mobile device.  In Industry Analysis we talk exactly about this type of potentially profit maximizing behavior, which in economics is called price discrimination or variable pricing.  In this case here we have group pricing, where firms have a profit maximizing incentive to charge customers in more price inelastic groups higher prices than customer who are more price elastic.

Various Pricing Strategies

In class I have been talking about various pricing strategies that firms use ultimately to increase their profits or to meet some other objective (such as entering a new market).  Here is a (incomplete) list of pricing strategies and some additional details on some of them.

Parking Prices in Seattle

Here is a nice article on how the city of Seattle can use prices to more efficiently allocate parking spaces.  In essence, Seattle moved from uniform pricing of parking spaces to price discrimination (group pricing) as a way of improving the allocation of parking spaces.  Admittedly, this is not as refined as San Francisco, it is also not as expensive.

One thing to keep in mind for the future is that the group pricing model shows that with constant marginal costs (seems fairly reasonable in this case) and charging different group (here neighborhoods) different prices will lead to more revenue than by charging uniform prices.  Thus if the parking authority in Seattle can keep some of the additional revenue, they can re-invest these resources to improve the parking price strategy to both improve allocative efficiency and the parking authorities bottom line.

I have blogged about parking prices before in San Francisco (using a demand and supply model) and Chicago (using a monopolist model).

Universal Theme Park and Price Discrimination

The New York Times reports that Universal Studios Theme Park is using a price discrimination model to increase revenues from park customers.  For $299 you can get valet parking, VIP tickets - which let you skip to the front of the line and other park amenities not available to those not paying the higher price.  As presented in class, this type of price discrimination (Group Pricing) will lead to higher revenues and profits than if the park were to charge all customer's the same price.

Hertz Looking in Group Pricing Rental Cars

The Wall Street Journal has an interesting article on how Hertz is investigating how to price rental cars between Hertz, and their recent acquisitions of Dollar and Thrifty rental car companies.  Hertz seems to be leaning toward pricing each in different segments (or groups) to compete in the three major categories of the rental car market - which is an application of the price discrimination model that I present in class.

Community College and Group Pricing

The New York Times has an interesting article on a recent proposal by Santa Monica Community College to change their course pricing policy.  The change is similar to what economists call third degree price discrimination or group pricing.  The article says that courses in higher demand would have a higher price than courses with lower demand, or as economists we could think about this in terms of courses with a higher price elasticity of demand would have lower prices and courses with a lower price elasticity of demand would have higher prices.