If you are not familiar with priceline.com, go to its Web site. Assume that an individual bids $50 on priceline.com for a room in Dallas, Texas, on August 24. Assume that August 24 is a Saturday, with low expected room demand in Dallas at a Marriott hotel, so there is excess room capacity. The fully allocated cost per room per day is assumed from hotel records as follows:
Housekeeping labor cost* ............. $25
Hotel depreciation expense ........... 37
Cost of room supplies (soap, paper, etc.) ..... 5
Laundry labor and material cost* ........ 10
Cost of desk staff .............. 5
Utility cost (mostly air conditioning) ........ 3
Total cost per room per day .......... $85
Should Marriott accept the customer bid for a night in Dallas on August 24 at a price of $50?