Emmanuel Fragnière (Haute Ecole de Gestion of Geneva and University of Bath)

The pricing of knowledge-based services: insights from the environmental sciences
Joint work with Joëlle Debély and Magali Dubosson (Haute Ecole de Gestion).
Wednesday 11 October 2006 at 13.00, JCMB 6203

Abstract

Most of the pricing schemes applied in the service sector are devoted to "service commodities" like airplane seats or hotel rooms. These techniques called dynamic pricing or revenue management exploit the fact that service commodities are sufficiently standardized. Service activities are traditionally described with the help of the IHIP paradigm (Intangibility, Heterogeneity, Instantaneity and Perishability). Indeed, compared to the production of goods, services will typically display a high degree of most of the 4 IHIP dimensions. As such, the intangibility and heterogeneity of knowledge-based services make that automated pricing schemes are not easy to model.

In our recent research, we are exploring other kinds of potential pricing schemes that could be used to determine a "fair" price taking into account the point of views of providers and consumers of knowledge-based services. To answer to this question, we adopt a multidisciplinary approach essentially grounded on the environmental sciences.

The main contribution of this paper is to integrate dollar-based valuation methods, normally used in the valuation of ecological services, to support the definition of prices adapted to knowledge-services. We are also discussing the difficulty of pricing intangible externalities and its consequences, as well as the difficulty of assessing the Willingness-To-Pay (WTP), which is an inherent problem of these approaches.

Dollar-based valuation methods 3 main families of approaches: implied market decisions, experimental market methods, and surrogate market techniques. We will present several case studies based on each of these approaches that we have developed for the tourism industry.

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