Disney Discovers Peak Pricing: Case Analysis

In the article “Disney Discovers Peak Pricing,” S.K. London explores the differences between price surging and price discrimination. Price surging is a system that is commonly known to be used by Uber. Uber claims that when demand goes up, price goes up along with it to make prices and demand proportionate (Diakopoulos). London states that an article published in Bloomberg claims that “Disney introduced surge pricing to its theme parks.” He counters Bloomberg’s claim by explaining that it is not actually surge pricing that Disney has introduced, but rather, price discrimination. Disney is not price surging, London argues that Disney is price discriminating, that is, capitalizing on high demand for entertainment when children/teens have no

London states “there is no clear mechanism for supply to increase in response to price…but Disney will struggle to offer more park. Second, because the price changes will be nowhere near as dynamic, prices will be higher at certain times of the year.” Disney is actually doing some “old-fashioned price discrimination” (London). According to Modern Principles: Microeconomics by Tyler Cowen, price discrimination is “the selling of the same product at different prices to different customers” (259). An important principle of price discrimination is, “if the demand curves are different, it is more profitable to set different prices in different markets than a single price that covers all markets” (Cowen, 261). In the summertime, it is easy for Disney to price discriminate and make their ticket prices higher. The demand during the summertime is higher than any other time due to many factors. The graph below shows a demand shift to the right from D1 to D2 because people have a “greater willingness to pay for the same quantity” (Cowen,

Disney institutes different pricing ranges during different times of the year. The reason why Disney does this is to make “an effort to better even out demand amid growing attendance” (Fritz). At certain times of the year; holidays, summer, and etc., Disney has a high demand for tickets, so they make their prices higher. Disney has changed their pricing by the time of year, “three sets of prices: value, regular and peak. Those categories will typically correlate to weekdays (value); weekends and summer weekdays (regular); and holiday periods and summer weekends (peak)” (Fritz). Disney does this type of pricing to eventually help smooth out the demand during the seasons