Federal Express offers two kinds of overnight delivery. There is priority overni

Question

Federal Express offers two kinds of overnight delivery. There is priority overnight, which is guaranteed to reach its destination by 10:30 A.M. the next day, and standard overnight, which is guaranteed to be delivered by 3 P.M. the next day. Priority costs 20% more than standard. Federal Express will often make 2 delivery trips to the same office in the same day just to avoid delivering the standard overnight packages before 10:30 A.M.. This is standard practice even if the package is available to be delivered before 10:30 A.M.. How can you explain this behavior? Hint: Is this a special pricing structure being used?

Explanation / Answer

This is an example of optimal utilization of time in a way which gives you an option of charging high from the customer even when you don't have to use your resources again.

The fedex uses the special method of pricing because they know that they can have advantage if they provide the facility of earlier delievery. Yes this is a kind of special pricing where pricing changes with time not with the quantiy/ demand/ supply

Related Questions

Navigate

• Browse (All)
• Browse F
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.