Our CEO and co – founder, Felipe Walker, is also a Pricing & Revenue Management professor in one of the most recognized business schools in Chile, Universidad Adolfo Ibañez (UAI). Since he has used the PricinGame in multiple occasions in his classes, reaching excellent results, we want to share his teaching experience with this simulator which is made up of 4 stages.
“In the first stage of this game I make the students start playing in an intuitive way. What am I expecting with this? That they can see the effect of the prices in the market. Even if there is no direct competition between the groups – because they are not taking customers away one to another – , the players can realize which one is doing better or worse, which means that in the second simulation for this stage the price dispersion will decrease due to the effect of market price”, says Felipe Walker about the start of PricinGame in his classes.
For the second stage of this simulation the prices are dynamic, but it is interesting to see that not every student choose to change them continuously.” This phase makes them realizing that a dynamic pricing strategy is not necessarily better than a static one. This is because the players don’t know how is the composition of the demand – is it composed by clients with high or low willingness to pay (WTP)?-, nor its behavior – how many clients will arrive tomorrow to buy our product?-, adds Felipe, while he assures that the students understand this concepts by themselves as they advance in the game.
“In the third stage of the PricinGame the students say: <<perfect, I can change the prices, but now my inventory is limited.>> At that point they realize that the inventory is key in the pricing policy. If they start selling cheap, they will inevitably run out of stock as the days go by, so they are afraid to raise their prices.That’s a mark-up strategy usually used by hotels, airlines and rent a cars, and in general, the entire tourism industry. But if they start with high prices, as time goes by they will have unprocessed stock, so they will be forced to lower prices; replicating what fashion retails usually do during sales. So in this third phase of the game, students know that there are two completely different strategies: markup and markdown, and that there are also those who opt for a fixed price policy”, says the UAI’s professor.
In the fourth and final phase of the simulation, Walker has found in classes that even without knowing the behavior of the demand, his students are already able to know the composition of the demand and segment. He explains that since they know that high WTP customers will purchase in the last days of the simulation, players can lower their prices for the first few days and increase prices for the latter. This leads to all following the same pricing strategy (markup) and set apart a stock for customers with high WTP that will last until the end. “In this 4th stage I usually see a much better performance of the students than in the 3rd stage,” he says.
Freedoms about this simulator
Even when Felipe has played the PricinGame in its full, sometimes he has also decided to skip stages to focus on the topic of his interest. “Last time, I used the simulator in a class of demand models, where I played the 3rd stage of the simulation and taught how to build a demand model based on the WTP in the Simulator’s Price Bank. To do this, I sent the students the Price Bank in Excel, each group built their demand model and started competing. The atmosphere in the classroom and the learning result was fascinating”, he says about the variation he made in the way of playing, taking advantage that the game is not restrictive.
Another freedom that the PricinGame allows is adjusting the product, so the professor can choose what he wants to sell during the simulation according to his and his students interests, reaching a bigger engagement to the game. The New York University’s Operations Management professor, Gustavo Vulcano, chose to sell VIP tickets for a Coldplay concert when he played the PricinGame in class, getting excellent results from his students because they felt related to the product. “Another teacher might choose to sell seats on a cruise or weeks in a resort, or what he thinks best”, says Felipe Walker, who has already adopted this simulator as part of his syllabus.
Some universities that have added the PricinGame to their classes are the Geneva Business School, Columbia University, Georgia Tech University, the Norwegian University School of Economics, among others.