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How is market based pricing implemented? Instead of the theory on demand supply curve, I would like to understand how it is implemented in practice, e

Marketing Jan 13, 2021

How is market based pricing implemented? Instead of the theory on demand supply curve, I would like to understand how it is implemented in practice, e.g., airline prices, Uber pricing, etc.

Expert Solution

The following examples will provide an idea on the actual/empirical implementation of a market based pricing.

Example 1

Someone is selling his apples in a weekend market and hope to sell all his harvest within the day. Around noon, he noticed that he still has a lot to sell. He decided to reduce his price in order to sell more apples. Before closing time, he still has a few more apples left and decided to offer it at an even lower price in order for him to sell all his harvest for the day.

Example 2

Uber usually has a lot more clients at night when everybody is rushing to get home. Their system increases the prices at this point. The price increase is necessary in order to encourage uber drivers to offer their service during the rush hour and discourage some clients/riders to use uber. If there will be no price change, some drivers might go home instead of spending time on the road and riders will have an even more difficult time getting a ride or might not be serviced at all for the given hour.

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