Thursday, June 20, 2013


Today's WSJ includes a (seemingly) whimsical piece, "If the World Were Run Like Airlines ... Sandwich Prices Would Spike at Peak Hours and 'Priority' Elevators at the Hotel Would Cost Extra."

What is all the fuss? Price is determined by the interesction of supply and demand. Five little words.

Joking! It's a serious question and the textbooks are not always the best source.

Here is another shot: Sellers charge what they can. That's also five little words and it highlights the fact that pricing is dynamic, on-going, all about feedback, learning-by-doing adjustments and never stops being difficult and challenging. Business people know all this.  It is their "bread and butter," so to speak. Bundle or unbundle services? Charge by level of service, including time-of-day and season-of-the-year?

There is another aspect. What kind of resistance will there be from a public (and media) that routinely expect cost-based prices (whatever that is). Anything that can plausibly be linked to "cost" (not opportunity cost) may be justifiable as "fair". Otherwise, be very careful.

I presume that this is all very simple and basic -- but often beyond the elites who make (and comment on) the policies we have.