Edited by Roland T. Rust and Ming-Hui Huang
Chapter 14: The pricing of services
This chapter considers the pricing of services. Given the vast nature of the pricing literature, this chapter focuses on three pricing topics that are particularly relevant for service industries. The first topic is advance pricing of services. Advance pricing is a pricing strategy for time-sensitive services where the service provider sells the service at different prices for different future times. For example, an airline offers a product line where the line consists of flights leaving on different days at different times. In this situation, the service provider can link the price to the duration of time between the time of the future consumption of the service and the purchase (or the commitment to purchase) the service. The specified time for future consumption may be very specific. For example, many entertainment services sell tickets for specific future dates and times. Other examples of specific future times include conferences, tours, cruises, professional courses, and so on. The time of consumption might also be a well-defined interval. For example, homecare services such as lawn services and exterminating might sell their service for a specific future week or future month. Finally, the future time of consumption might be a complex condition often related to industry seasons. For example, an amusement park ticket might specify admission during future off-peak days (for example, Monday through Thursday) or future off-peak months (September through November).
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