With Priceline’s “Name Your Own Price” reservations for hotels, airlines and car rentals, consumers input the prices they are willing to pay for specific services on specific dates. The identities of businesses are not named. Consumers must agree to accept whatever reservations meet their criteria. Priceline takes each bid and compares it to prices that business are willing to accept.
If a bid is agreed to by a business, its name is revealed, and the consumer is committed to the reservation. In addition, for flight reservations, the exact departure and return times are disclosed after the bid has been accepted.
Priceline encourages consumers to shop around to find the lowest prices. If these are not acceptable, the recommendation is to offer amounts that fit their budgets. Consumers are advised that reasonable prices that are not too far from the norm are more likely to be accepted.
Businesses agree to these confidential negotiations when they have uncommitted inventory. In this way, they are able to sell services that may otherwise have gone unused. Sometimes, consumers receive deep discounts. For instance, during 2014, “Name Your Own Price” flights produced as much as a 40 percent savings over the website’s published fares. During the same period, some car rentals had that same discount, and hotel markdowns were as much as 60 percent.