What Is Priceline?


An Introduction to Priceline.com

Priceline has recently bombarded the airways with commercials asking "What if the whole world went shopping at once?" and "What if the more people that wanted to buy something, the lower the price got?" These commercials seem very different than the reality of their web page. At first glance, Priceline.com shows something not very different from other on-line auctions. However, the company has implemented the use of something they call a "demand collection system", and it is the application of this model towards e-commerce that makes Priceline.com a true innovation.

Starting Out As Walker Digital

The demand collection model is a patented development of Walker Digital. Walker created the patent as a system of collecting buyer demand and communicating that demand to sellers. The patent, also includes the software which constantly updates this information, giving sellers the maximum information about consumer interest and their reserve prices for a particular product. Priceline is a spin-off of Walker Digital, created to merge the idea of a demand collection system into the high-speed world of the internet. As a spin-off, Priceline could fully tap the mass-audience of the internet to turn their system into a true virtual model of interaction between supply and demand.

So far the goods sold at Priceline.com are like those already described, the surplus of goods that are fixed in supply. Airline seats and hotel rooms that would have sat vacant, cars unsold, and potential mortgage money in a bank, not earning interest. In the sale of these goods, there is a type of price discrimination going on, effected by the buyer. The seller can lower one unit's price to increase profit without cutting into their overall price structure. But Priceline has new ventures in mind, including the recently implemented WebHouse Club. Here items offered for sale will be the surplus of more common items, such as groceries. The buyers going through Priceline will act cohesively similar to a price club, offering lower prices together like one buyer in bulk. As he pricing system becomes more popular, use of the demand collection model has the potential to begin influencing the overall price structure of goods sold.

Some people predict that the next thing in line is the possibility of true first degree price discrimination. As this method of purchase becomes more popular, the use of the demand collection system has the potential to begin influencing overall price structure. It is difficult to see in which markets this would work. As more people shop through Priceline, there will be less and less surplus quantity of those goods sold, and the reserve price of the seller will more closely match the true market price of the good. In this condition, there will be no motivation for the shopper to use Priceline as opposed to another method of purchase.

See the Walker Patent at the US Patent and Trademark Office