Case Article—Bidding on Priceline
Chris K. Anderson - cfa9@cornell.edu
School of Hotel Administration, Cornell University, Ithaca, New York 14850
John G. Wilson - jwilson@ivey.uwo.ca
Richard Ivey School of Business, University of Western Ontario, London, Ontario, N6A 315 Canada
Gouren Zhang - gzhang@ivey.uwo.ca
Richard Ivey School of Business, University of Western Ontario, London, Ontario, N6A 315 Canada
Abstract
Priceline.com is an Internet-based corporation offering services (airline tickets, hotel rooms, rental cars, and home mortgages) with the option for consumers to dictate prices. Priceline's original success stemmed from its innovative "name your price" approach whereby consumers bid for service with Priceline to find a willing provider at the bid price. Consumers are only allowed to bid once on a service so they must be strategic in bidding---bid too low and potentially lose out on service, bid too high and overpay for the service. While they are only allowed to bid once per product, bidders can slightly alter their service and potentially re-bid in an effort to get new information (from failed attempts)—such alterations may include a different class of hotel (3 star versus 4), a flight with 1 stop versus direct, or (as in the case below) a different class (economy versus luxury) of rental car.
The case is designed to cover a broad range of topics while introducing students to auctions. The case teaches strategic bidding while covering probability, decision analysis, and integer programming. The case has had great success at the undergraduate and MBA levels as students enjoy the setting, are familiar with Priceline, and immediately see an everyday use of management science.
Key words
auctions; pricing
History
Received: April 2007; accepted: July 2008. This paper was with the authors 4 months for 2 revisions.
Download the PDFs
Teaching Note (visit the Case Teaching Notes and Other Restricted Materials page to download this PDF)
Citation Information
Anderson, C. K., J. G. Wilson, G. Zhang. 2008. Case—Bidding on Priceline. INFORMS Trans. Ed. 9(1) 35-36. Available online at http://ite.pubs.informs.org/.
DOI: 10.1287/ited.1080.0016ca
