Setting Prices on Priceline

Chris K. Anderson ()
Additional contact information
Chris K. Anderson: School of Hotel Administration, Cornell University, Ithaca, New York 14853

Interfaces, 2009, vol. 39, issue 4, 307-315

Abstract: Priceline is best known for its name-your-own-price format, in which consumers bid for services but not for service providers. Because Priceline serves as an opaque selling mechanism, it attracts price-conscious consumers. Sellers also benefit because they can price into multiple market segments without worrying that they are diluting revenue they might receive from customers who are willing to use conventional selling channels and pay more. A firm that releases its inventory to Priceline must manage the trade-off of pricing its inventory too low (and forgoing revenue) versus pricing it too high and forgoing a sale. In this paper, we outline the mechanism that Priceline uses to determine if customer bids are successful and, given this mechanism, establishes optimal prices and inventory allocations for Kimpton Hotels.

Keywords: dynamic programming; marketing; pricing; buyer behavior (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

Downloads: (external link)
http://dx.doi.org/10.1287/inte.1090.0447 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:orinte:v:39:y:2009:i:4:p:307-315

Access Statistics for this article

More articles in Interfaces from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().