Disneyland’s New Pricing Model: Gouging or Better Customer Service?

business_ethics_highlights_2This Consumerist piece is indicative of the journalistic tendency to misunderstand the role of pricing, generally, and the role of peak-load pricing (like Uber’s “surge” pricing), particularly. Throughout, the writer hints that Disney’s effort to price more popular days at its theme parks higher than less popular days is fundamentally a price gouging scheme. However, prices don’t change only how much people pay for products—they change people’s purchasing decisions, as well. Higher prices offer a reason to purchase less; lower prices offer a reason to purchase more. We understand this intuitively in other domains: taxes on cigarettes are intended to raise their price such that, at the margin, fewer people buy (or, at least, smokers buy fewer) cigarettes; U.S. subsidies for the production of ethanol are intended to reduce the price of ethanol-enriched gasoline such that, at the margin, people will fill their cars with more ethanol-enriched gasoline. Here, as the Los Angeles Times article linked in the Consumerist piece reports, “The pressure for Disney to address its overcrowding problem has been growing. … During the holiday season, Disneyland has been forced to shut its gates for a time when the park reaches maximum capacity.” In other words, Disney’s parks have encountered crowd-control problems that make it hard to maintain the customer experience and serve all customers who want to visit. These are telltale signs that their product is underpriced. Through higher prices on popular days and lower prices on less popular ones, Disney is encouraging its most price-sensitive customers to either shift their patronage to less popular days or, at the margin, forego visiting Disneyland. Just like with cigarette taxes and ethanol subsidies, Disney is using prices to encourage people to change their purchasing decisions for the better. Once one understands this, the Consumerist piece’s claim that, under the new pricing format, “you’ve got a 70% chance of paying more than you do now” seems bizarre. That would be true only if you choose days to visit a Disney park either at random or in some other wholly-price-insensitive way. >>>

LINK: Your Trip To A Disney Park Is Probably Going To Get More Expensive With New “Demand Pricing” System (by Mary Beth Quirk for Consumerist)

We first heard Disney was considering a new surge pricing model back in October, and thus, it has come to pass: the next time you plan a trip to the mouse’s house, you’re likely going to be paying more, depending when you visit.

The new surge pricing system is in place as of yesterday at U.S parks including Disneyland and Disney World, … in a change from the current one-day ticket price of $99. If you decide to hang out at the park on a slow day, like a Wednesday in the middle of September, you’ll pay $95.

But most days of the year will be more expensive, with prices for a “regular” day or “peak” day hiking to $105 and $119, respectively. About 30% of the year will be designated as “value days,” 44% will be “regular” and 26% will be “peak,” which means you’ve got a 70% chance of paying more than you do now.

What do you think?

Related: Disneyland ‘demand pricing’ will cost you $5 less on slow days and $20 more when it’s busy (by Hugo Martin for Los Angeles Times)


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One comment

  1. Another way of putting it: Disney’s customers were *already* paying surge prices — but they were paying the premium in terms of wait times and closed gates, rather than in dollars.

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