1. Explain differential pricing. Cite examples of services that use each type of differential pricing. Differential pricing is used to shift demand, either reducing it in higher demand periods or stimulating it in low demand periods. There are five different types including time of service, time of reservation, time of purchase, target markets, and location of consumption. An example of time of service differential pricing is a restaurant charging a different price for the same meal at lunch versus dinner time. Time of reservation is used by hotels who charge more during peak periods such as summer at the beach. High school dances often sell tickets at a cheaper price in advance then at the door, which is an example of time of purchase. An example of target markets is a free or discounted rate for senior citizens charged by public transportation. It of ten costs more money to eat at a restaurant in a high-class city such as New York City, which is an example of location of consumption differential pricing. 2.
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