If you are not familiar with Priceline.com Inc. (PCLN), check out its website. Assume that an individual “names a price” of $85 on Priceline.com for a room in Nashville, Tennessee, on August 22. Assume that August 22 is a Saturday with low expected room demand at a Marriott International, Inc. (MAR), hotel in Nashville, so there is excess room capacity. The fully allocated cost per room per day is assumed from hotel records as follows:

Housekeeping labor cost*.........................................................................$ 38

Hotel depreciation expense........................................................................43

Cost of room supplies (soap, paper, etc.)...................................................8

Laundry labor and material cost*...............................................................10

Cost of desk staff...........................................................................................6

Utility cost (mostly air conditioning)............................................................5

Total cost per room per day........................................................................$110

*Both housekeeping and laundry staff include many part-time workers so that the workload is variable to demand. Should Marriott accept the customer’s $85 bid? Why or why not?