Name your own price
Name your own price is a pricing strategy under which buyers make a suggestion for a product’s price and the transaction occurs only if a seller accepts this quoted price. What happens is that the seller waits for a potential buyer's offer and can then either accept or reject that 'named price' that the user had offered.
As the Internet is continuously being developed and online marketplaces are becoming increasingly more popular, consumers have more choices in terms of product pricing. Popularized by the reverse auction pioneer, Priceline.com, such pricing strategy asks consumers to 'name their own price' for various products and services like air tickets, hotels, rental cars, etc.
The first bid a consumer places and the subsequent bid increments express the consumer's willingness or unwillingness to haggle. "The economic argument is that the number of bids a consumer submits to win a product in a NYOP auction is determined by the bidder’s intention to trade off higher expected savings from haggling against the associated frictional costs".
NYOP retailers do not post a price for their products, and the final price of the transaction is only determined via a "reverse auction process", and these are key features that distinguish hotels and travel intermediaries from NYOP retailers. Similarly, LetYouKnow, Inc. pioneered the application of its own patented matching method within confines of the reverse auction process, whereby consumers name their own price for new vehicles.
Originally, name-your-own-price sales are considered "opaque" by marketers because buyers "don't know the name of the supplier or the schedule until after" they make a nonrefundable purchase. Suppliers benefit because they can sell to the most price-conscious buyers/travelers without publicly disclosing those low rates.
Priceline.com
, an online travel agency offered a name your own price option. However, by 2005, Priceline began to de-emphasize this system, and added published price options on its websites.A 2014 academic study showed that posted prices can guarantee higher profitability to service providers than the name-your-own-price mechanism.
Priceline's price discrimination methods
Priceline.com has two different methods of price discrimination according to the product categories offered. For example, for multi-attributable products that are fairly close substitutes, such as hotel accommodation or air travel, Priceline uses a certain price discrimination method where potential buyers place offers on such products, uncertain about some of the attributes of the product. For instance, customers placing offers for air travel are uncertain about the travel schedule in details and do not know which carriers will place their orders, thus allowing Priceline to screen consumers according to their type, and this in turn allows airlines to serve customers that they were not able to distinguish from less price-sensitive customers before.Priceline used a different price discrimination method for selling undifferentiated goods. Using this method, Priceline used haggling effort—representing consumer effort and time loss from the online haggling process—as a way of discriminating between different customers. For example, a consumer placing an offer for calling capacity can start with a low offer and then—after waiting for a 60-second time period and then getting rejected—the offer is incremented. Before barring customers from submitting additional offers for 24 hours when Priceline used NYOP, Priceline also previously allowed customers to submit three offers consecutively for the same phone number and the same capacity.