Dynamic pricing
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. Consult the following video before getting started:
The Ideal Auction.
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.
Surge pricing and congestion pricing are two strategies used to regulate the supply and demand of goods or services. Surge pricing is a dynamic pricing model in which prices vary depending on the current level of demand for a particular product or service, while congestion pricing is a type of toll system where fees are imposed to discourage overuse (Walker et al., 2020).
An example of surge pricing can be seen with popular ride-hailing services such as Uber and Lyft. During peak times such as rush hour when more drivers are needed to meet customer demand, companies will increase their fares proportionately in order to maximize profits. This encourages drivers to stay on the road by providing them with incentives for working during these periods (Khan & Fiaschi 2018). On the other hand, congestion charges refer specifically to extra fees imposed by local governments onto travelers who enter specific zones within cities that experience high levels traffic. In London for instance, cars must pay an additional fee if they enter designated areas within certain hours day between Monday and Friday (Mayor Of London 2019).
To summarize, while both surge and congestion pricing aim to address issues related to supply and demand, they do so in different ways. Surge prices fluctuate based on customer needs while congestion charges serve as deterrents away from busy areas during specified times throughout week days.
