Peak load pricing

pricing strategies in Managerial economics

1. Jyothi s, Assistant Professor, GFGCW, Holenarasipura . ARTHADHARE

2. PRICING PRACTICES Peak-Load Pricing

3. Introduction: Consider a firm that experiences two costs; a capacity cost and a marginal cost . How should capacity be priced? The basic  peak-load pricing  problem, pioneered by Marcel Boiteux .

4. Meaning The  Peak Load Pricing  is the pricing strategy wherein the high price is charged for the goods and services during times when their demand is at peak . In other words, the high price charged during the high demand period is called as the peak load pricing.

5. It is a form of inter-temporal price discrimination based on efficiency i.e . a firm discriminates on the basis of  high usage, high-traffic, high demand times and low demand times .

6. Nature of Goods The peak load pricing is widely used in the case of  non-storable goods  such as electricity, transport, telephone, security services, etc . These are the goods which cannot be stored and hence their production is required to be increased to meet the increased demand .

7. Thus, the  marginal cost  is also high during the peak periods as the capacity to produce these goods is limited.

8. References: Managerial Economics, principles and worldwide applications, eighth edition(2019) , Dominick salvatore , siddhartha K.Rastogi . Various Online sources.