Yield management (revenue management) has produced significant revenue gains for some firms. Some consumers extract a certain level of excitement by successfully locating or negotiating a particularly low price, but for others, yield management produces frustration. These customers often feel that they were charged more than necessary and that some other customers must be getting a better deal for the same service. Economics teaches us that a perfect pricing scheme would charge each customer exactly the maximum amount that he or she would be willing to pay, thus transferring all consumer surplus to the selling firm. However, consumers do not live in a vacuum, and in the real world, customers talk and reputation (good and bad) spreads.
Discuss your opinions about revenue management as consumers. Do you like knowing that the airline price that you looked up an hour before might have changed already? Do you like playing a “wait and see” game until you think prices have hit rock bottom? Do you feel that you are treated unfairly? Discussion the ethics of price discrimination. Even if the practice is legal, is it ethical to treat consumers differently just because supply and demand conditions have changed? Should someone who reserved and paid for a spot on the cruise ship a year earlier have to pay twice as much as the last-minute vacationer who caught a discount price the day before the ship left? If given a choice, would you select to purchase from a firm that did not price discriminate vs. one that did (or vice versa)? The explosion of companies like Hotels.com, Expedia.com, Priceline.com, etc., have made it easier for consumers to find the lowest price. How do you feel about these companies from the consumer perspective? Do you think it gives certain companies an unfair advantage?