Pricing and Advertising

"Alex Yenni recently endeavored to take his wife and 5-year-old son bowling with another family in Petaluma, Calif., close to their home. The plan quickly went into the gutter. Mr. Yenni, a 42-year-old advertising executive, tried to book online in advance at AMF Boulevard Lanes, where he wanted to reserve two lanes for two hours at 3 p.m. on the last Thursday of the year during winter break.

The price quoted by the website, run by national operator Bowlero Corp., knocked him over: $418.90. "This strikes me as outrageous for a pedestrian family activity," he said. Mr. Yenni emailed Bowlero, and received a response saying due to the convenience of advance booking, "the pricing for a reservation is different than our walk-in rates or any current advertised specials." The company's CFO said pricing based on day and time helps match pricing to demand, "simultaneously maximizing guest happiness through reasonable wait times and maximizing profitability by scaling price when the willingness to pay is there.

Many consumers have experienced surge pricing when booking a hot ticket, such as Taylor Swift's latest concert tour, or a flight during a snowstorm travel disruption. The practice, also called dynamic pricing, has also crept into the more ordinary realm, such as the gym or municipal golf course. Some restaurants are experimenting with real-time pricing based on demand. That can be a boost for businessesand irritating for consumers."

Bowling for $418? Surge Pricing Creeps Into Restaurants, Movies, Gym Class, WSJ, March 2023

1. Is dynamic or surge pricing a form of price discrimination? Explain your answer. (5 points)
2. Can you think of other examples of industries and businesses that have implemented dynamic pricing, and how does dynamic pricing, or surge pricing, benefit businesses? (5 points)
3. What ethical and transparency considerations should businesses take into account when implementing dynamic pricing, and how can they balance the benefits of price discrimination with customer satisfaction and fairness? (4 points)