The Implementation of Dynamic Pricing
Advisor: Mr. Mike Lee
Internship Location: A major ticketing company
Onsite Mentor: Anonymous
Dynamic pricing, well defined by an anonymous focus group member is: “a pricing strategy that businesses use for their services or products to optimize revenue based on external factors.” More specifically, it is the practice of charging different people different prices for the same goods based on things like demand, time of purchase, and customer characteristics (the external factors) and it is prevalent in many industries, including concert ticketing, but actually originated in the aviation industry. Dynamic pricings relevancy is also increasing (shown by Wendy’s decision to implement it starting in 2025!) which was a big part of me choosing this topic. My project explores the concept of dynamic pricing, its utilization in ticketing platforms for concerts compared to airlines, and the ethical considerations/implications of the practice on consumers. I’ve reviewed existing literature and completed interviews to affirm my research and created a survey sent out to understand a consumer's understanding and perspective on the subject. I believe that the findings of this research are important for increasing the awareness and understanding of dynamic pricing practices, and encouraging consumers to make more informed decisions. The ethical considerations play a crucial role in dynamic pricing practices, as they impact consumer trust and perception of fairness. By exploring the ethical implications of dynamic pricing in ticketing platforms for concerts compared to airlines, my research contributes to the ongoing discussion on customer rights and business ethics. Understanding these implications is not only important for consumers but also for business, as it can help them develop more ethical and sustainable pricing strategies.
Project Blog
Week 0: Introduction
Have you ever wondered why you pay a greater price for a concert ticket earlier on in the sales? Or if you pay for a plane ticket closer to your travel date it will be higher than it might have been two months ago? Hello, and welcome to my senior project blog! My name is Charlotte Joyce and I have been at BASIS Independent Brooklyn since 8th grade. For my senior project, I am excited to answer the following question: How do ticketing platforms for concerts versus airlines employ dynamic pricing, and what ethical considerations surround the use of dynamic pricing in terms of its impact on consumers? I first became interested in dynamic pricing in 2018 during Taylor Swift’s Reputation tour and all the controversy surrounding the possible usage of dynamic pricing. Additionally, my step-dad used to work in the aviation industry which is what led me to be interested in the comparison of how dynamic pricing is utilised in concerts versus airlines.
To view more on my project process click here.
Until starting some preliminary research on my topic, something that I was unaware of in regards to the usage of dynamic pricing in selling concert tickets was the fact that it is not the promoter of a concert (concert promoters organise and present live music events, doing everything from booking the artists, securing venues, selling tickets and marketing the show) that chooses to use dynamic pricing but actually that choice is given to the artist who the promoter is selling the tickets for. And the biggest difference between its usage for concerts and airlines is scarcity. Because there are only so many chances to get to see an artist, fans get more upset if they are unable to obtain a ticket because of availability or price than they would if they are unable to get a plane ticket, because plane tickets aren’t only available on occasion.
Yet, this information is only scratching the surface of everything that dynamic pricing is and throughout the next couple of weeks, I plan to get a deeper understanding of dynamic pricing. I look forward to sharing my research with everyone!
Week 1: Preliminary Research
Ethics. We don’t have one singular definition because it varies based on the situation. So what would the definition be when applied to dynamic pricing? Hello, and welcome back to my Senior Project Blog! This week was quite exciting as I started a lot of my preliminary research and developed some new questions to look at. During the beginning of the week, I researched some courses and decided to audit a Coursera course called Pricing Strategy in Practice in order to supplement my understanding of pricing strategies and how they work. I also started tentatively outlining the types of people that I want to get to interview as well as send out surveys to. In the second part of the week I continued my literature review.
As I mentioned in my Week 0 blog post the biggest difference between the usage of dynamic pricing for concerts and airplane tickets is scarcity. When buying tickets for concerts, which I am sure many of you have done before, you tend to get more invested in getting onto the website as soon as they become available or you will get more worked up about the prices or even the inability to purchase a ticket. But when we turn to look at buying tickets for a plane, you don’t tend to see these kinds of reactions as often. This is because there are more than two or three nights that you can get that plane. There are multiple. But the lack of these reactions is also connected to the idea of transparency. Consumers tend to not understand how or when dynamic pricing is being used and for concerts when they have these “reactions” its based on their personal biases. By completing my research I hope to help consumers understand what is and isn’t dynamic pricing so that they can make more informed decisions.
This is when ethics also comes in. Ethics is really hard to define because it is such a spectrum. But we can start by talking about the feeling of “fairness”. It feels unfair when you, as a lifelong fan of an artist, don’t get a ticket to a concert because the prices are out of your budget, or when the tickets all get bought by people who can pay the high prices of them, but haven’t had the same commitment as you to the artist. So in your head that may seem unfair but to the people who bought the tickets it might seem fair because they have the money to be able buy the ticket. This is why we can’t use just one person's definition of fair or unfair because then it becomes skewed. We have to combine multiple definitions and in the case of my project connect it to the usage of dynamic pricing for concerts and airlines. This is why I plan to continue to do my literature review and then supplement it with interviews and surveys to get a balanced definition.
Though I am still early on in my research my biggest concern about dynamic pricing is the “Lack of transparency about the prices charged or the possible breaches of privacy involved in gathering information about each customer’s reservation price, the fact that different customers are charged different prices may suggest that those customers who have been charged the higher prices might have been exploited through having been charged an unfair price.” (Elegido, 2011, p. 634) This gives me the impression that this practice should be considered unethical.
Something that I found interesting when talking to my on-site advisor is that dynamic pricing actually has nothing to do with competition, whereas I thought it was one of the main components, but rather it is strictly used for maximising revenue and it isn’t designed to satisfy the consumer.
Overall, this week was very interesting for panning out questions to delve into during my research and I am really excited to see where it will lead me. I also think things like Wendy’s planning to start to use dynamic pricing shows that dynamic pricing is becoming more widespread and more things could potentially become dynamically priced, making my research even more valuable to the consumers who could have to get used to seeing dynamic pricing on a much more frequent basis. Thank you for continuing to read my blog, I look forward to sharing even more exciting findings with you all in the weeks to come!
Week 2: Continued Research and Interview Planning
In my research, I believe that gathering feedback from the general population is just as important as reading academic journals and conducting professional interviews because of my focus on the ethics behind its usage. Welcome back to my blog! I hope everyone enjoyed their spring break. This week I delved deeper into academic articles and began planning for my surveys and interviews.
When reading my articles this week something that I found interesting and also applied to many of you reading my blog is prices for colleges are dynamically priced. Because colleges base the amount of financial aid they give you off of the student’s merit and the family’s financial position, effectively charging different prices to different students based on the demographic characteristics of the consumers, which is one of the things that dynamic prices depend on.
I also dedicated time this week to researching potential interviewees in the relevant field. To respect the current controversy surrounding dynamic pricing, I will offer all interviewees the option to remain anonymous.
Also, on the topic of current controversies surrounding dynamic pricing, I want to touch on the lawsuit that a Taylor Swift fan filled against LiveNation. Despite the fan dropping it, I thought it was interesting to understand. The fan filed this lawsuit after the disastrous presale of tickets to her Eras Tour. The fan claimed that LiveNation was a “monopoly” that had “knowingly misled millions of fans.” According to my on-site advisor, a senior executive at a major ticketing company, the delays and website crashes as fans were trying to buy tickets would have just been an overcrowding of the website and had no correlation to LiveNation trying to use dynamic pricing (which as I mentioned in my week 0 post would not have been LiveNation’s decision but rather Taylor Swifts) or them misleading fans.
Though I am mainly focusing my research on the concert and airline industries I want to talk about the hotel industry briefly today. Mr. Lee, my Basis Independent advisor, sent me an article this week about how prices for hotels have skyrocketed this week because of the solar eclipse. In “Grayville, Illinois, [they are] advertising rooms between $765 and $949 from Sunday through Tuesday. On most days, the rooms typically cost $80.” (Goel) This is a perfect example for pricing being affected by demand. Because of the sudden increase in people wanting hotel rooms, and even Airbnb in the area around the solar eclipse path, the companies are taking advantage to increase their revenue. Hotels and Airbnb aren’t the only companies doing this either, “Establishments like Smoothie King, Applebees, and Sonic are offering special eclipse-themed smoothies, margaritas, and “blackout” drinks to mark the occasion.” (Goel)
Things like this show how relevant dynamic pricing is and why consumers should understand it more. Thank you for reading my blog this week, and I hope you will join me next week.
Week 3: Wendy’s and Survey Creating
Is dynamic pricing beneficial or harmful in the food industry? Hello, and welcome back to my blog!
I want to go back to something that I said in an earlier blog entry, the fact that Wendy’s will be implementing dynamic pricing. When I first heard this news, I thought it was the stupidest decision that a chain like Wendy’s could make. Dynamic pricing is based on things like location, demand, and inventory. Because of this fact, my thought process was something along the lines of “if you went to a Wendy’s in the city comparatively to say one on the side of a highway, you’re automatically paying higher prices just because of the location” and “if you went to a Wendy’s at breakfast, lunch, or dinner, you’d be being a higher amount than someone who went to the same location and lets say 1 am in the morning.” Because of these thoughts, I assumed that they would immediately lose business, but after talking to a friend about them, he brought up an interesting point, that it could actually attract more customers because people would be drawn to the lower prices, and it could also encourage people to buy more because of the lower prices. Wendy’s also claimed that despite them calling it dynamic pricing (which does raise prices) they would only be lowering prices in less busy periods of the day. This whole situation is very interesting to me and I look forward to seeing how it all plays out and if it will be beneficial or harmful for them.
I spent a lot of time this week continuing to research people to interview because considering that is where I will be getting a majority of my research from, I will want as many people as I can in order to gain a large enough data sample size for my project. I hope to interview people specifically in the concert and airline industries because that is the focus of my research. However, I also hope to talk to other professionals in fields where dynamic pricing is utilised in order to grasp a more widespread knowledge of the subject.
I also spent time working on my survey and curating the questions. I hope to complete that over the next week and start sending it out the week after that to start collecting data and also have it supplement my current research even more. I’m planning to ask questions that will help me understand how widely dynamic pricing is understood and consumer's opinions on the subject.
Thank you for tuning into my blog this week and I look forward to sharing more findings with you next week!
Week 4: History of Dynamic Pricing in Airlines
Did you know that “the computer reservations systems (CRSs) developed for the travel industry were among the earliest examples of e-commerce.”? (Smith et al., 2001, pg.37) Did you know that American Airlines was the first company to implement dynamic pricing?
Hello and welcome back to my blog! This week I made significant progress on my survey this week and hope to have it available in the next few days and will make sure to add a link on my blog post next week!
I also delved into a journal, “E-Commerce and Operations Research in Airline Planning, Marketing, and Distribution.” This journal went into the history of Airlines' presence as an e-commerce company and how dynamic pricing started to get utilised. I learned that “through the 1970s, the Civil Aeronautics Board (CAB) regulated domestic airfares in the United States. Discounted fares were not widely available on scheduled carriers except for narrowly defined demographic groups, such as children and students.” (Smith et al., 2001, pg.39) This early approach, although not directly labelled as dynamic pricing, involved adjusting prices based on demographic characteristics, laying the foundation for later practices.
The strategy of offering limited discounted fares did not last long. As the journal notes, “By the mid-1970s [...] They realised that every empty seat flown was produced at almost zero incremental cost and selling otherwise empty seats at low prices could increase revenue and profits” (Smith et al., 2001, pg.39). This shift in perspective marked a pivotal moment in pricing strategies, emphasising the importance of maximising revenue through dynamic pricing models.
In order to optimise their pricing structure, “airlines developed yield management to fine-tune their increasingly complex pricing structures by tracking reservations and selectively turning on and off the availability of low fares” (Smith et al., 2001, pg.39). This allowed airlines to respond to fluctuations in demand, ensuring seats would be filled while also maximising revenue.“In January 1985, American Airlines launched a discount-pricing campaign, ‘Ultimate Super Savers,’ directed at filling the otherwise empty seats.” This is when the practice of “offer[ing] full service at discounted fares priced at or below low-cost carriers” (Smith et al., 2001, pg.40). This strategy helped airlines fill their planes but also set a precedent for pricing strategies in the industry, highlighting the use of dynamic pricing in maximising revenue.
Thank you for tuning in on my blog again this week and be prepared to fill out a survey next week 🙂
For reference:
Smith, B. C., Günther, D. P., Rao, B. V., & Ratlife, R. M. (2001). E-Commerce and Operations Research in Airline Planning, Marketing, and Distribution. Interfaces, 31(2), 37–55. https://doi.org/10.1287/inte.31.2.37.10627
Week 5: Updates, Survey, and Focus Group
“Consumers generally purchase products with incomplete information about the alternatives” and “frequently do infer quality from price” (Smith et al., 2001, pg.34 -35)
Hello and welcome back to my blog!
First and foremost, I am excited to announce that my survey is complete! I’ve attached it at the end of my post. I’d appreciate it if everyone would take some time to complete it and even more so, any additional sharing of the link so I can reach more people!
Next, I want to talk a little about the article I read this week: “Best Value, Price-Seeking, and Price Aversion: The Impact of Information and Learning on Consumer Choices.” by Gerard J. Tellis & Gary J. Gaeth. This article explored how consumers make choices based on perceived value, pricing strategies, and their attitudes towards pricing information. The authors looked at the psychology behind consumer decision-making, considering factors such as how consumers seek out information, their reactions to different pricing strategies, and how learning influences their choices over time. I found this really beneficial to my research because it helped me better understand consumer behaviour and how that could impact how businesses develop different pricing strategies in response to demand.
This week I also had a really beneficial conversation with my on-site advisor. After talking to him, I came to the decision to not focus a lot of my energy on interviews for my data. I will still reach out to a few people to interview to gain more insight on dynamic pricing and reaffirm the findings that I already have. But, I won’t plan to use it as my primary source of data. Rather I will just focus on getting my survey out to as many people as possible and using that as I believe that the information that I will gain from that will be more beneficial to my research (which is also why I would love assistance in sharing my survey to more people!). I believe it will be more beneficial to my research because I found that a lot of the information that I was hoping to gain from interviews I have been able to gain from my own research.
While talking to my on-site advisor, he gave me the idea to conduct a focus group. This will allow my to ask questions (some similar to those on my survey) but more in-depth and I will also hopefully be able to conduct some meaningful debates.
I have managed to set up my first one this coming Tuesday. Because I have never conducted a focus group myself, the idea is to treat this as a trial run. I will still plan on using the data I gather from it, but because the group is on the smaller side it will allow me to make mistakes and find ways to fix them. If this one goes well I then plan to host a much larger one with a more diverse group of people. I’m really excited to go forward with this and look forward to sharing how it goes in my blog post next week!
Thank you for reading my blog post this week and please take some time to fill out the following survey!
https://forms.gle/9Bcius6KGqsuJJqf6
For reference:
Tellis, Gerard J., and Gary J. Gaeth. “Best Value, Price-Seeking, and Price Aversion: The Impact of Information and Learning on Consumer Choices.” Journal of Marketing, vol. 54, no. 2, Apr. 1990, p. 34, https://doi.org/10.2307/1251868. Accessed 11 Dec. 2023.
Week 6: More Focus Group & Survey Updates
“It’s a pricing strategy that businesses use for their services or products to optimise revenue based on external factors.” (focus group member)
Hello and welcome back to my blog!
As I mentioned last week, this week I conducted my trial focus group. I found it very informative and it was interesting to hear everyone's responses to my questions and reactions to the theoretical situations I gave them. Above is the definition that one of the group members gave me when asked to define dynamic pricing, which I thought to be a very good overview of what dynamic pricing is and wanted to share it! I am still listening to the audio and going through the data I gathered and hope to share everything I learn next week.
In regards to trying out the focus group concept, I think it was really helpful and am now working with the administration to try and set one up at school with a larger more diverse group of people. When I finished this session I asked the participants for feedback and I was given little to no negative feedback, most saying that they really enjoyed the questions put forth and how I structured the session which is good news and means I won’t have to change much when planning for the next session.
I also wanted to talk about where I am at with my survey. I have now gotten around 190 responses, with more still trickling in, so thank you to everyone who filled it out! I plan to continue to get it around to more people as the larger the sample size that I am able to gain the more precise my data will be when I analyse it. Again, any help sharing that around would be greatly appreciated!
While looking through the responses I have so far from the survey, I was amazed by how diverse the group of people I have is so far (images 1 & 2) as well as how split the answers on some of the theoretical situations were. For example, the last one, where I asked the following question: “A software company offers its products for different prices based on the user's location or perceived willingness to pay. Some see this as a fair way to price goods in a global market, while others argue it discriminates against certain customers. What do you think?” shown in image 3. I am excited to delve into reading the more detailed responses that people gave that justified their choice.
Thank you for reading my blog this week and I can't wait to share more of my findings next week!
Week 7: Connecting Economic Principles and Ethical Values
Dynamic pricing is generally seen as fair for luxury goods but raises concerns for essential items. This is one of the themes of my trial focus group that I will go more into today.
Hello and welcome back to my blog!
To start this week off, I want to give a quick update on my survey progress. I am now at 211 responses and am still investigating more ways to get it across to people. On Wednesday I uploaded it onto a website called PollPool, which seems like a promising way to get more people to complete it. I will also research other possible websites to upload it to this week as well as alternate methods. Also, I have a friend who is willing to help me put it up on a site that she knows of that she has used previously for a research project. I have also continued the process of analysing the data by grouping people by different demographic characteristics and reading all the responses and will give you updates on that soon hopefully.
Update on my deliverable: Because I am now not focusing my energy on interviews, and only doing a few that I think will definitely benefit my research, I have decided to change my deliverable. I was originally going to produce a document with the questions that I will ask each person I interview, along with the answers and an analysis of what I learned from all the interviews, including things like patterns, flaws, and any general gaps in knowledge. Rather, I will plan on writing a research paper, combining everything from all the articles I have read as well as the data I am collecting from my survey and the few interviews that I do collect. I will plan on start writing that this week.
On the topic of interviews, I have an interview set up for the 20th of May with the friend of a participant who contacted me after completing my survey. He has had major experience with dynamic pricing, first working in the travel industry then founding a company who has clients that utilise dynamic pricing. I’m very excited to get the opportunity to talk to him. The other people that I have emailed have yet to reply to my emails requesting for an interview, but I am hoping they still will yet.
Unrelated to my senior project, I am currently taking two summer college courses, one of them being Principles of Microeconomics. While I was doing my textbook reading this week a few things stood out to me that I wanted to share here because I thought it to be relevant to my research.
In economics, the concept, marginal change, defined as a small incremental adjustment to a plan of action, helps us understand how the value of goods is perceived. For example, the textbook talks about, while water is essential for life, its marginal cost is low because it is abundant. On the other hand, diamonds, which are not essential for survival, have a high marginal cost due to their scarcity and perceived value. (N Gregory Mankiw, 2021).
This economic principle resonates with a discussion I had with my focus grou about the ethics of dynamic pricing. One member shared that they believe dynamic pricing can be fair, particularly for luxury goods like concert tickets or flights, where there are alternative options available. They argued that in such cases, dynamic pricing based on factors like demand or time of day can be justified as it reflects the market value of the product.
The connection between these ideas lies in how scarcity influences the perceived value of goods. Just as diamonds are priced higher due to their scarcity, dynamic pricing for luxury goods can be seen as a reflection of their market value. However, for essential goods like water, where equal access is crucial, dynamic pricing could be considered unethical as it may restrict access based on ability to pay. This idea highlights that I should consider both economic principles and ethical values while continuing my research.
Another thing that stood out to me from the textbook was when it mentioned that “Uber cars often charge less than taxis, but not always. Uber's prices rise significantly when there is a surge in demand, such as during a sudden rainstorm or late on New Year's Eve, when numerous tipsy partiers are looking for a safe way to get home. By contrast, regulated taxis are typically prevented from surge pricing.” (N Gregory Mankiw, 2021) Though I was aware that Uber utilised dynamic pricing, I didn’t consider comparing it to regulated taxis, which don’t. This week I plan to research more into this and better understand the differences between the two companies.
This week I also updated my abstract to better reflect my project so far. And today, I started an article today called “Foundations for Pricing” by Thomas Nagle that looks really promising for my research and I plan on sharing the insight that I gain from it next week!
I look forward to updating you next week! We are getting closer to the end of the project timeline!
For Reference:
N Gregory Mankiw. (2021). Principles of microeconomics (9th ed.). Cengage Learning.
Week 8: Final Deliverable and Focus Groups
Happy belated Mother’s Day to any mothers reading my blog! Did you get any flowers this Mother’s Day? Well, if you did, whoever bought them would have been subjected to dynamic pricing!
Hello and welcome back to my blog!
Because it has become a tradition to give flowers to your mum on Mother’s Day, flower sellers are aware of this and raise prices significantly because they are aware that there will be a larger demand for them.
This week I was mostly focused on my AP but I did spend a lot of time starting to outline my final deliverable, figuring out how I wanted to structure it and how I wanted to incorporate the articles that I have read so far and the focus groups that I have conducted.
Speaking of focus groups, this Friday I conducted two additional focus groups thanks to the amazing administration at school. Comparatively to the first focus group I conducted these had a larger group, with a more diverse range of grades. I found this one really interesting because no one in either group put their hands up when asked if they had previously heard of the term dynamic pricing, so the concept was actually new to them. Their opinions on all of the theoretical scenarios that I placed forth were much more diverse than the first group I conducted. While all the people in the first group I conducted agreed on whether each scenario was fair or unfair, both these groups had people on both sides of the argument for each of the scenarios which made for some really interesting discussions. The first group touched on the idea of a luxury good and a necessity good (which first came up in my trial focus group), while the second group didn’t which was an interesting comparison. I look forward to going back through the recordings to further understand all the different opinions that came up.
With my interview coming up soon as I mentioned in last week's blog, I have started coming up with questions that I want to ask him. I am also planning on interviewing my step-dad this week who used to be the CEO of Jetstar, a major airline company and has in-depth experience with dynamic pricing.
Regarding my survey, I have only gotten two additional responses from last week, so I am planning on closing responses sometime this week. I have added a link to it below, and before I close it, I would appreciate anyone who hasn’t had the chance to complete it to please do so!
Survey Link - https://forms.gle/ENkpVww8q8EJ6mmZA
In addition to my interviews, this week I plan on reading some more articles as well as starting to create my slides for my presentation based on everything that I have so far, and will continue to add to them as I pull together all of my remaining data as we come to a close with the senior project.
I look forward to updating you next week!
Week 9: “Where art meets science is where brands and pricing come together”
The title statement was said by Bruce Buchanan, the former CEO of Jetstar, in an interview I conducted with him this week.
Hello and welcome back to my blog!
When I began my research project, I was set in my opinion that ethically, dynamic pricing was a negative thing, that despite what I would learn over the term of this project would change my mind. But the past couple of weeks, and especially with the two interviews I conducted this week, I’ve really been able to see the benefits of its usage, not only on the producers who are able to gain a greater revenue but also on the consumer.
Conducting my interview with Bruce this week was very informative, and I gained a lot of new insight from it. He explained more in-depth how dynamic pricing is used in general but particularly in the airline industry. But, the thing that stood out to me the most though was when he said “Pricing is both an art form and a science, most people think it’s just like science, I just have to price things to get the supply-demand curve working. That actually misses a key piece of the puzzle, a key piece of the puzzle is you need to bring consumers along. And that’s the art piece, you need to educate them, make them inspired by the brand, understand if they do something different from a behaviour perspective, they get a benefit. And so, where art meets science is where brands and pricing come together” (Bruce Buchanan)
This stood out to me because it highlights the often-overlooked human element in pricing strategies. Dynamic pricing isn’t just about algorithms and data, it’s about understanding consumer behaviour and effectively communicating the value proposition to them. This approach emphasises the importance of consumer education and engagement, ensuring that they see the benefits of dynamic pricing rather than just the fluctuating costs.
Bruce’s insight underscores the necessity of balancing technical precision with creative marketing. For instance, in the airline industry, dynamic pricing must account for factors like seasonality, demand spikes, and competition. However, to truly succeed, airlines also need to foster brand loyalty and educate their customers about how dynamic pricing can work in their favour, such as booking flights during off-peak times for better rates.
This interview has made me appreciate the complexity behind dynamic pricing and its implementation. It requires a strategic blend of analytical skills and creative communication to align pricing strategies with consumer expectations and behaviours. This holistic approach can ultimately lead to more sustainable and positive outcomes for both businesses and their customers.
Additionally to conducting my interview with Bruce this week, I also conducted it with Andres Fabris, the founder and CEO of Traxo. Overall, the interview was very successful and I gained a lot from it. This week I plan to go back through the transcript of our meeting and will share more with you next week. Additionally, at the end of our meeting, he offered to connect me to another person he knows who could potentially have really interesting insight into my project.
This week I also officially closed my survey, so thank you to everyone who filled it out! I got a total of 215 responses. I have asked a family member who is familiar with doing this sort of thing to help me finish analysing the data.
I also spent a lot of my time this week working on writing my final deliverable. With my outline completed, I wrote the introduction, some of the conclusion, and bits and pieces of different paragraphs as I continue to figure out how I want the articles that I have read to fit into my essay.
Thank you for continuing to read my blog and I look forward to updating you next week!
Week 10: More on pricing strategies
"In a world of imperfect information, what really determines price sensitivity is not the number and similarity of substitutes in the marketplace, but the number and similarity about which a typical consumer is aware.” (Nagle, 1984)
Hello and welcome back to my blog!
I came across this insightful quote from Thomas Nagle's article on price discrimination, which I forgot to mention in an earlier post. Nagle’s article delves into both the legal and ethical considerations of pricing strategies, particularly focusing on price discrimination, which he describes as “selling the same physical product at different net prices to different customers.”
Legal Considerations:
Nagle first discusses antitrust laws and regulations and how price discrimination can violate these laws, that are designed to promote fair competition. He mentions the Robinson-Patman Act (1936) which prohibits charging different prices to different buyers for goods of the same grade and quality when it may harm competition. And claims that businesses must navigate these boundaries in order to avoid anti-competitive practices and potential lawsuits. Additionally, Nagle considers that different countries have varying standards for price discrimination, so global companies must comply with the legal frameworks in each market, because what is legal in one place may be illegal in another. I found this last point particularly interesting, because while I was partially aware of this fact I hadn’t researched it in-depth to look at the different legal frameworks for different countries/markets and will make sure to put some time aside this week in order to do so.
Ethical Considerations:
Nagle also discusses how price discrimination can lead to perceptions of unfair treatment if consumers feel they are charged differently based on location, purchase history, or socio-economic status. He talks about how clear and transparent pricing is crucial for maintaining trust, as hidden or obscure pricing practices can damage a company’s reputation and how price discrimination can create barriers for certain consumer groups, like higher prices for essential goods in low-income areas. Without transparency, consumers are less likely to trust producers when they sell their goods.
Additionally, this week I have made significant progress on my final deliverable and am basically done analysing the data from my survey and focus groups and am excited to share those results with you all next week.
Stay tuned for those updates next week and thank you for continuing to keep updated on my project!
Week 11: Interview w/Andres and Survey Results
Ethical missteps in dynamic pricing are typically short-lived due to market correction
Welcome back to my blog!
What I mentioned above is only one of the interesting things that Andres mentioned in our interview in week 9, here is a summary of everything else we talked about:
Andres Fabris is the founder and CEO of a company that provides a dashboard for corporations to track employee purchases in real-time. For example, with airlines, the system integrates various travel-related services, offering a comprehensive solution for managing travel data. The system operates post-booking, detecting bookings from any travel sites and from confirmation emails and providing a comprehensive overview for the corporation. Andres’s role within the company includes setting the company’s direction, hiring, raising capital, public relations, and interacting with clients and investors.
When asked about challenges that his company has gone through he talks about convincing large, risk-averse clients to adopt new technology and navigating through economic downturns like COVID-19. He emphasises how important the usage of a subscription-based revenue model for resilience during low transaction periods such as COVID-19 because fewer people were buying things like concert tickets and airline tickets otherwise they probably would not have had enough revenue.
Andres defined dynamic pricing as “a system where prices are adjusted in real-time based on market signals” and adds that though it was initially used by airlines, it now extends to hotels, activities, and even restaurants, where inventory is perishable.
He goes on to explain how dynamic pricing offers multiple price points and personalised offers to improve revenue and that price changes are usually due to inventory shifts or personalized discounts, not discriminatory practices.
He also talks about the transition from older systems to new distribution capabilities (NDC) that allows for more dynamic and personalised pricing. Andres then predicts that dynamic pricing will become more prevalent, urging companies to adopt it to stay competitive.
On another note, this week I have also managed to finish my analysis of my survey and wanted to share some interesting things that I found from it.
Below is a chart that represents the understanding of dynamic pricing by age and education level. Though I originally predicted that the older you are and the higher education level you have the more likely you are to know what dynamic pricing is, it was exciting to see that information confirmed through the survey.
One of the theoretical questions that I asked was as follows (attached is also a pie chart of how many yes/no I received):
The following are quotes that reasonably represent each age group's reasoning behind their answer:
14 or Below:
“I don’t know”
15-17:
“Water is a necessity, and upcharging doesn’t benefit anyone except the seller.”
18-24:
“People deserve to get water. It shouldn’t be like a luxury.”
25-34:
“Water is a necessity, not a luxury, so it should be free and readily available to everyone.”
35-44:
“Water is an essential need.”
45-54:
“Water should be made available to more people.”
55-64:
“When people are struggling, companies should not take advantage of shortages.”
65 and Above:
“Only if water is very scarce. Otherwise, it’s price gouging.”
Additionally, this week I spent a lot of time continuing to work on my final deliverable and am confident that I will have it completed by Monday, when I will do one last look over it with my BASIS advisor, Mr. Lee, to make sure that everything is good to be handed in. I also started creating my slides for my presentation, which I will also make sure is completed by Monday in order to ask Mr. Lee to also review those.
Keep tuned for my final blog post next week because I will share my concluding thoughts and links to my presentation and final deliverable for anyone who is interested in getting to see those!
Week 12: Concluding blog post
Hi everyone and welcome to my last blog post!
This week I presented my project in front of many of you and I believe it went well. I really enjoyed answering many insightful questions and hearing everyone's concluding thoughts on my project.
Thank you to everyone who has kept up to date with my blog posts, I have enjoyed keeping you all updated throughout this amazing journey. I really appreciated the opportunity BASIS gave me to complete this independent project. I also want to say a big thank you to both my BASIS Independent Brooklyn advisor, Mr. Lee and my on-site advisor for the invaluable help and insight for my project, I couldn’t have gotten this all done without their assistance.
Below are the links to both my presentation and final deliverable for anyone who is interested in having a look!
My presentation:
https://docs.google.com/presentation/d/1fZGzyZO3l9jFx3faJhi_j5DIK7ANbGiwb3wJs4X-nGw/edit?usp=sharing
My final deliverable:
https://docs.google.com/document/d/1gXjQDPvnejLGfoGu_yx19OqXgpsqS-rNGYj-cZpToXg/edit?usp=sharing