Pricing Simulation
FOR COURSES IN:
UNIVERSAL Microeconomics
Operations Management
RENTAL CAR V2 Strategy
Marketing
Version 2
UPDATED
EDITION
by John T. Gourville, Harvard Business School,
Tom Nagle, and John Hogan
Pricing Simulation: Universal Rental Car V2
At a Florida rental car agency, students assume general market demand for rental cars. Running
the role of a district manager responsible for out of cars in the highly competitive Florida rental
setting rental car prices in up to three cities: market is lost opportunity for profit, while having
Miami, Orlando, and Tampa. Students analyze unrented cars left in inventory increases operating
price sensitivity for business and leisure travelers costs. Ultimately, students must develop a strategy
and consider pricing strategies to maximize to maximize the cumulative profit of the firm.
vehicle rentals across weekdays and weekends in The second release of this popular simulation is
each city. Students must forecast demand while designed to deliver powerful learning to students
understanding that demand varies seasonally while streamlining tools for faculty to conduct an
and that competitive pricing decisions also affect effective debrief.
Students analyze unit sales, capacity utilization, and expected market demand to determine weekday and weekend prices for rental cars.
hbsp.harvard.edu
ANALYZING DEMAND AND
PRICE SENSITIVITY
Students begin the simulation with
three months of historical data that
allows them to begin analyzing
demand for car rentals and available
capacity at Universal Rental Car. Each
city serves a different mix of business
and leisure travelers and the particular
price sensitivities of these segments
cause demand variations in each city
and between weekdays and weekends.
Students must consider both historical
data and market demand forecasts to
understand price elasticity for the two
market segments.
The prices set by Universal and its
competitor also affect the size of the
rental car market and market share
between companies. Higher prices not
only affect a customer’s choice of
where to rent a car but also the Students must consider capacity utilization in each city and the effect pricing has on demand.
decision to rent a car at all.
MAXIMIZING INVENTORY UNDERSTANDING THE CONFIGURING SCENARIOS
AND PROFITABILITY COMPETITION
Students benefit from playing
In addition to analyzing demand, For every pricing decision, students the simulation multiple times using
students must also consider the must consider the possible varied scenarios to experience
supply of rental cars at each location. competitive reactions. Instructors different pricing challenges. Faculty
Each simulated month, they examine have the option of changing the can choose among three pre-set
capacity utilization for weekday and behavior of the competition for a pricing scenarios or create a
weekend rentals. Running out of particular scenario. For example, one custom scenario.
cars in a busy month is lost revenue, option has the competition using a
while having too many cars left predatory pricing model that always
unrented also affects profitability. undercuts Universal’s pricing. The
Every car carries fixed costs that competition can also be set to simply
must be considered in order to raise prices incrementally each round.
keep the agency profitable.
VIEWING HIGH SCORES
Instructors can also set up the To make the simulation more
simulation to require students to competitive, instructors can allow
allocate inventory among the cities students to view high scores from
every three simulated months. the class while the simulation is in
This option allows students to progress. The list of high scores
adjust capacity to best meet ranks the other users in the class
anticipated demand and reduce by cumulative profit.
the number of unfilled orders.
ADMINISTRATION TOOLS ON NEXT PAGE ➜
Administration Tools for Faculty
A comprehensive Teaching Note
covers key learning objectives:
■■ nderstanding the nature and
U
dynamics of consumer response
to price (price elasticity)
■■ ccounting for differences in
A
demand across customer
segments and regions
■■Understanding and accounting
for seasonal variations in demand
■■ xploring how pricing decisions
E
affect firm profitability
■■Using pricing strategies to
manage inventory
■■ nticipating competitive response
A
to pricing decisions
■■ nderstanding how general economic
U
conditions affect market demand Faculty can review web-based results for the entire class as well as detailed results
for each student.
MC169020911
New to this edition:
NEW Design—Updated visuals and NEW Dynamic Debrief Slides— NEW Simulation Status—Simulation
Product #M10924
navigation allow students to analyze Instructors can download presentation- status information can be viewed from
information quickly and make decisions. ready debrief slides of class results. within the instructor’s coursepack and
Class data automatically displays from within the simulation itself. This
NEW Teaching Materials—Updated highest cumulative profit, unit sales, includes the current pricing scenario
Printed on recycled paper.
Teaching Note reduces the time and other key metrics in an easy-to- students are set to play.
required to learn the simulation. read graphic format.
Product #7005 | Single-player | Seat Time: 90 minutes | Developed in partnership with Forio Online Simulations
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