Sign up ×
Quantitative Finance Stack Exchange is a question and answer site for finance professionals and academics. It's 100% free, no registration required.

i just don't get it.

Peak-load pricing wiki page gives example:

in public goods such as public urban transportation, where day demand (peak period) is usually much higher than night demand (off-peak period)

Price discrimination wiki page gives example:

For example, schedule-sensitive business passengers who are willing to pay \$300 for a seat from city A to city B cannot purchase a \$150 ticket because the \$150 booking class contains a requirement for a Saturday night stay, or a 15-day advance purchase, or another fare rule that discourages, minimizes, or effectively prevents a sale to business passengers.

But I don't really see the difference.

In the example of urban transportation, people pay more to buy the convenience of "peak period usage"; while in the other example of air tickets, people pay more to buy the convenience of "returning without spending a Saturday night stay" (so that they could enjoy quality time with family) or "without 15-day advance purchase" (so that they need not spend time planning the detailed, maybe even trifle things that might happen in the future).

For example, a company might hire a secretary to book tickets in 15-days' advance, while need to pay the secretary; or, just buy air tickets when needed, while need to pay the premium of convenience.

that convenience is really a need, why shall government bother?

share|improve this question

1 Answer 1

That things are similar but addresses different range of customers and separation is needed because some ranges are bigger then is less possibility of price movement. For example Price-Load addresses wide range and not much price movement are possible here, in Price discrimination range are more narrow and more possibility in price movement are possible. When 2 models are independent are profitable then best work on both.

Example for price discrimination working w/out price load:

First company w/out possibility to plan trip ahead pay more and that is calculated into that company operating costs.

Second company who have possibility of planning trip ahead and planning more rips than first company will hire secretary to plan all trips inside company and take return from lowering trip costs when money saved on tickets will be greater than payoff for secretary.

This is obvious that first company should have pay more for tickets because they are don't have possibility to plan trip ahead like second company and for transportation company is better to have tickets sold faster than slower, because that raising possibilities to make promotions on tickets not sold or gives time to better manage inside assets for lowering operating costs like change some bigger bus to lower that also carry all passengers, but have lower usage costs.

That will be not logic when price for both companies will be equal because after that: -

  1. income from tickets will be lower (same tickets sold, for company A pays lower price)
  2. company 2 probably will be drop planning trips ahead and fire secretary
  3. transportation company has higher operating costs due to lower possibility of managing assets in way that makes most revenue
share|improve this answer

Your Answer


By posting your answer, you agree to the privacy policy and terms of service.

Not the answer you're looking for? Browse other questions tagged or ask your own question.