Question

you own a franchise of rental car agencies in florida. you recently read a report indicating that about 80 percent of all tourists visit florida during the winter months in any given year, and that 60 percent of all tourists traveling to florida by air rent automobiles. travelers not planning ahead often have great difficulty finding rental cars due to high demand. however, during nonwinter months tourism drops dramatically and travelers have no problem securing rental car reservations. determine the optimal pricing strategy for this situation. you own a franchise of rental car agencies in florida. you recently read a report indicating that about 80 percent of all tourists visit florida during the winter months in any given year, and that 60 percent of all tourists traveling to florida by air rent automobiles. travelers not planning ahead often have great difficulty finding rental cars due to high demand. however, during nonwinter months tourism drops dramatically and travelers have no problem securing rental car reservations. determine the optimal pricing strategy for this situation. peak-load pricing. randomized pricing block pricing two-part pricing

Answer 1

The optimal pricing strategy for a rental car franchise in Florida, given the seasonal demand, is peak-load pricing. This approach consists of charging higher prices during the high-demand winter months and lower prices during off-peak times to maximize revenue and manage fleet utilization effectively.

Step-by-step explanation:

The optimal pricing strategy for a franchise of rental car agencies in Florida, considering the fluctuations in tourist visits and car rental demand, is peak-load pricing. Peak-load pricing involves adjusting prices in response to demand variation, charging higher prices during periods of high demand and lower prices when demand wanes.

Applied here, rental car prices would be increased during the winter months when 80 percent of tourists visit and demand for rentals soars, primarily due to 60 percent of tourists traveling by air choosing to rent cars. Conversely, during the nonwinter months when tourism subsides, prices could be reduced to maintain an attractive service and compete for the reduced number of customers.

This strategy acknowledges that an increase in the price of rental cars signals consumers about the high demand and possible shortage, which could encourage them to plan ahead and book cars in advance or travel in non-peak seasons when prices are lower. It also allows the business to maximize revenue during peak periods and remain competitive during off-peak times. Additionally, the strategy can help manage the fleet's utilization rate efficiently throughout the year.