Peak pricing refers to the practice of charging higher prices for goods or services during times of high demand, while off-peak pricing refers to the practice of charging lower prices during times of low demand.
Here are a few examples of peak and off-peak pricing:
- Airline tickets: Airline tickets are often more expensive during peak travel times such as holidays and the summer vacation season, and less expensive during off-peak times such as midweek and the winter months.
- Hotel rooms: Hotel rooms are often more expensive during peak tourist seasons and events, and less expensive during off-peak times. Many hotels use dynamic pricing where the room rate is based almost entirely on the strength of demand relative to the supply of available rooms.
- Electricity: Electricity is often more expensive during peak usage times such as hot summer afternoons when air conditioning usage is high, and less expensive during off-peak times such as the middle of the night.
- Amusem*nt park tickets: Amusem*nt park tickets are often more expensive during peak summer months and holidays, and less expensive during off-peak times such as weekdays.
- Ski resort lift tickets: Ski resort lift tickets are often more expensive during peak winter holiday periods, and less expensive during off-peak times such as weekdays and the spring and fall shoulder seasons.
Peak and off-peak pricing and price elasticity of demand
During periods of peak demand, the price elasticity of demand may be different than it is during non-peak periods.
For example, during a peak travel season, the demand for airline tickets may be relatively inelastic (with a coefficient of PED < 1) because travellers are willing to pay a higher price to secure a seat on a flight.
On the other hand, during an off-peak travel season, the demand for airline tickets may be more price elastic (with a coefficient of PED >1) because travellers have more options and may be more price sensitive.
In general, it is more common for demand to be more elastic during non-peak periods, while demand is often more inelastic during peak periods. This is because during peak periods, there may be fewer substitutes available and consumers may be more willing to pay a higher price to obtain the good or service.
