Variable Pricing

June 20th, 2013
ideas, money
Mary sells tasty pizza from her food truck. Charging $2/slice, she always has a long line. A friend points out that charging a bit more would probably mean selling fewer slices, but with the higher price she wouldn't need to sell as many to come out ahead. After some experimentation, Mary finds that $3/slice is where she makes the most money.

Another friend notices that some people are in a hurry and would be willing to pay a premium for pizza now instead of waiting in line. Would there be some way to charge different people differently?

The next morning Mary puts up three signs on the side of the truck: $2, $3, and $5. As people come for pizza she asks them to make three lines, one for each sign, based on how much they want to pay. She tells people she'll serve one person from each line before moving on to the next so no one starves.

The $2 line is long, as it used to be when $2 was the standard price. Some people would rather have pizza sooner than money and wait in the $3 line. At $5 there is no line, but a few people in a hurry use it to walk up and get expensive pizza right away. Mary makes more money, the people who can afford to pay less get cheaper pizza, and the people in a hurry now have an option to trade off time and money.

Comment via: google plus, facebook, substack

Recent posts on blogs I like:

Parenting standards and the village

Cartoons Hate Her has written about the village nobody wants. In principle, parents usually want a community to help take care of their kids: someone to bring meals when they get sick, keep an eye on their children while they play, and talk to about paren…

via Thing of Things December 19, 2025

Opinionated takes on parenting

This post is a collection of parenting takes that sometimes go through my head, based on my experience raising our two boys (5 and 2 years old). All of this is based on my experience and might not apply to others (see the law of equal and opposite advice)…

via Victoria Krakovna December 16, 2025

How to Make a Christmas Wreath

Yesterday, I made a Christmas wreath. Here's how to make one. First, find an evergreen tree near your house. Clip off a few branches from the tree. Try to have as many leaves or needles on the branches as possible. Next, bring them home. What I usu…

via Anna Wise's Blog Posts December 6, 2025

more     (via openring)