Dynamic Pricing – Strategies for Enhancing Profitability

DYNAMIC PRICING – STRATEGIES FOR ENHANCING PROFITABILITY
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DYNAMIC PRICING – STRATEGIES FOR ENHANCING PROFITABILITY
Surge Versus Congestion Pricing
Congestion pricing is a strategy in dynamic pricing that regulates demand for products by increasing the prices of products and services while maintaining the supply of the same. The price increases in congestion pricing are mainly applied to products and services whose demand is prone to cyclic or temporary increase (Lehe, 2019). Congestion pricing aims to prevent increased use of products and services when prices are low. It regulates the use of products and services to prevent wastage. Congestion pricing is mainly used during peak seasons to avoid misuse of goods and services and to prevent congestion. It also aims to maintain the quality of products and services by regulating demand. The congestion pricing strategy increases the prices of products and services during peak periods to maintain quality and prevent overuse. An example of congestion pricing in use is the pricing strategy in the transport industry, where airlines and transport services increase transport costs to reduce air pollution caused by the transport industry (Lehe, 2019). It also uses the strategy to reduce overcrowding by increasing travel costs to populated areas and cities to control congestion in these regions.
On the other hand, surge pricing, also known as dynamic pricing, is a strategy where the prices of products and services increase due to a decrease in supply. Prices under the surge pricing strategy are flexible with changes in demand and supply (Courcoubetis & Dimakis, 2018). Due to price changes in the surge pricing strategy, the increased prices of products and services allow users to decide to consume the products and services based on urgency. Therefore, users who desperately need products using the surge pricing strategies can consume the products, while those who do not urgently need the products will not. The strategy helps to meet the market's decreased supply and increased demand. An example of the use of the surge-pricing dynamic involves the ridesharing companies such as Lyft and Uber (Courcoubetis & Dimakis, 2018). The cost of using their services increases during peak hours when the demand for their services is high and there are few available riders. 
Types of Auctions and how they uncover value
Dutch Auction
The Dutch auction involves the auctioneer's bids on a product or service, starting from the highest price and moving downwards to a value where it receives a bid offer. In the Dutch auction, the price of a product or service descends until it receives a bid offer. The Dutch auction uncovers the value of a product. The bidders in a Dutch auction set the value of the product or service by bidding their preferred lowest price (Fine, 2019). The Dutch auction uncovers value when the first bidder wins the auction by agreeing to their preferred lowest price, thus setting the reserve price of the product or service based on the amount they are willing to pay to acquire the product or service (Balzer et al., 2022). An example of how the Dutch auction sets value is during the sale of the security, such as shares, when the first bidder wins the auction by agreeing to purchase 200 shares for $800, down from $1000, thus setting the reserve price. 
English Auction
On the other hand, the English auction involves the bidder starting the auction with the lowest bid. Bidders place bids on the items with the prices ascending. The bidder with the highest amount on the items wins the auction after placing a bid higher than all the other bidders (Fine, 2019). The highest bid on the item uncovers the value of the item. The English auction uncovers value when an auction begins with the bidder setting the lowest amount on an item. The bidders compete for the item by placing higher bids based on the amount they are willing to spend on the item until the last bid is made with the highest amount. The highest bidder uncovers the value of the item based on the amount they are willing to spend. An example of how the English auction sets value is when a bidder purchases a house at $4000, up from $800, and agrees to pay the amount to acquire it.
Sealed-bid First-price Auction
The sealed-bid first-price auction, also referred to as the blin...