Home > Term: peak pricing
peak pricing
When capacity is fixed and demand varies during a time period, it may make sense to charge above-average prices when demand peaks. Because this will divert some peak demand to cheaper off-peak periods, it will reduce the total amount of capacity needed at the peak and reduce the amount of capacity lying idle at off-peak times, thus resulting in a more efficient use of resources. Peak pricing is common in services with substantial fixed capacity, such as electricity supply and rail transport, as anybody who pays higher fares to travel during rush hours knows only too well.
- Part of Speech: noun
- Industry/Domain: Economy
- Category: Economics
- Company: The Economist
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- summer.l
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