Priceline is a website that sells flights and hotel bookings based on the price that a consumer states that he or she is willing to pay. So, a consumer who wants to book a flight or a hotel room needs to tell Priceline the price that they are willing to pay and the seller lets Priceline know whether he is willing to accept that price.
a. How do sellers make profits by using this form of pricing?
b. In 1999, Priceline attempted to replicate this pricing strategy with groceries and gasoline. However, using this pricing strategy with these two goods soon proved unprofitable. What could explain this?