Is pay-what-you-want a viable hotel pricing strategy?

My fiancée and I are taking a trip to Halifax this summer. I booked a mystery hotel online using Priceline's name-your-own-price function, and ended up with the Westin Nova Scotian.

In researching the hotel, I discovered that they ran a very interesting promotion over spring break, where they set aside 60 rooms for guests to pay what they wanted. Pay-what-you-want is a unique (if not gimmicky) pricing strategy that seems to have been popping up quite a bit in recent years, perhaps thanks to Radiohead's use of the strategy to sell their album In Rainbows.

Why aren't car sales going down?

When I was writing my previous blog post, I used shoes and shoelaces as an example of complements (in economic theory, when the price of one good goes up, demand for its complement will go down).

As I continued writing, I realized that shoes and shoelaces was a lame example and that perhaps cars and gasoline would be a better example. Unless you've got an electric car or you just want somewhere to sit, a car isn't much use without gasoline. Likewise, unless you're an arsonist, you can't do much with a jug of gasoline if you don't have a car.

B.C. cruise tax would hurt Washington and Alaska

When one jurisdiction raises its consumption taxes, it's usually good for the neighbouring jurisdiction. This is common sense — if the cigarette tax is almost four times higher in Montana than neighbouring North Dakota, for example, Montanans will drive to North Dakota to save money on cigarettes. Montana businesses lose cigarette revenue and the government loses tax revenue, while North Dakota gains.

But a potential tax on cruise ship passengers visiting Victoria (hat tip to Andrea Craig), as advocated by consultant and UVic lecturer Brian Scarfe, could actually be a bad thing for neighbouring jurisdictions.

An ingenious nudge

I discovered a very bright "nudge" while meeting up with some friends at the local Royal Oak last night (for non-Ottawan readers, it's probably the biggest pub chain in the nation's capital).

The Royal Oak does a good job of providing a decent atmosphere, decent food and a decent pint. They are also do a surprisingly good job of using anchors to their advantage. Anchors are quite simple and can be very effective — by triggering a customer's mind to a specific price or rate, you can affect how much they value a product.