ABSTRACT
This chapter deals with time-based methods of price segmentation. Two cases are considered, pricing by time of use and pricing by time of purchase. In the first case different prices may be charged at different hours of the day, days of the week or seasons of the year. In some industries peak-load pricing is common as transport, restaurants, hotels etc. are fully utilised at peak times but may have spare capacity at other times. In theory, if there is spare capacity, off-peak price should be set equal to marginal cost, while at peak times price is set to effectively ration the service. Investment in expanded facilities should be justified by peak demand alone unless prices above marginal cost can be charged at off-peak times.
Periodic pricing also arises in the technology and fashion industries where high prices are charged for new products, but these prices fall over time, tapping more price sensitive segments of the market.
In some industries advance booking is possible and dynamic pricing can be employed, varying price depending on number of advance bookings over time and aiming for full utilisation of aircraft and hotels.
