For instance, customers placing offers for air travel are uncertain about the travel schedule in details and do not know which carriers will place their orders, thus allowing Priceline to screen consumers according to their type, and this in turn allows airlines to serve customers that they were not able to distinguish from less price-sensitive customers before.
Priceline uses a different price discrimination method for selling undifferentiated goods.
Using this method, Priceline uses haggling effort—representing consumer effort and time loss from the online haggling process— as a way of discriminating between different customers.
Before barring customers from submitting additional offers for 24 hours, Priceline allows customers to submit three offers consecutively for the same phone number and the same capacity.
Firstly, the consumer is asked to provide certain identification if he/she is an existing user, or to register as a new user.
This is followed by the consumer setting an offer for the desired product.
Afterwards, the retailer compares the consumer's offered price with an internal threshold price.
The "Name-Your-Own-Price" (NYOP) is a system under which buyers make a suggestion for a product’s price (unlike the traditional way where sellers quote a certain price) and the transaction occurs only if a seller accepts this quoted price.
As the Internet is continuously being developed and the online marketplaces are becoming increasingly more popular, consumers have more choices in terms of product pricing.Popularised by the reverse auction pioneer, Priceline.com, such pricing strategy asks consumers to 'name their own price' for various products and services like air tickets, hotels, rental cars, ... The first bid a consumer places and the subsequent bid increments express the consumer's willingness or unwillingness to haggle."The economic argument is that the number of bids a consumer submits to win a product in a NYOP auction is determined by the bidder’s intention to trade off higher expected savings from haggling against the associated frictional costs" .NYOP retailers do not post a price for their products, and the final price of the transaction is only determined via a "reverse auction process", and these are key features that distinguish hotels and travel intermediaries from NYOP retailers.Originally, Name-your-own-price sales are considered "opaque" by marketers because buyers "don't know the name of the supplier (airline, hotel or car rental company) or the schedule (with air tickets) until after" they make a nonrefundable purchase.has two different methods of price discrimination according to the product categories offered.