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I am always surprised why there are certain services or items which are on high demand, and do not have their prices increased to generate more profit.

As an example, tickets to the very popular EDM festival are always sold out in minutes, but the price each year increases little. Every year the tickets are at around 200-300€, so why not make them 400-500€, since they would still be most likely sold out in a matter of weeks or months, wouldn't they?

Another example, I know a shoemaker who from time to time sells around 20-50 pairs of cordovan shoes, at a price of around 340€/pair. All the shoe stock is ordered (online sales) in around 1 day. Why wouldn't they increase the price by at least 10-20%, and then sell these same shoes over a week or so?

I can see one possible explanation - that getting money immediately has more value, but it seems to me that in the overall a much bigger profit could be obtained if the price was simply increased.

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  • $\begingroup$ I think you should have more than just two anecdotes to support your premise that "the prices for very popular items do not increase". $\endgroup$ – Kenny LJ Jun 25 '17 at 7:16
  • $\begingroup$ @KennyLJ This is common knowledge, isn't it? I am sure you heard about tickets for certain events being sold out in minutes of hours. $\endgroup$ – user1880405 Jun 26 '17 at 7:17
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Some online-shop does practice price discrimination.

However, the seller must play the price game carefully to maximize their profits:

  • Lower price means lower profit per units but may increase revenue and increase overall profits
  • Higher price is more profitable but hurt sales
  • Shelter for the rainy day
  • Competition

In addition, influence factors such as inflation, hot money also come in play. For example, during economy bubbles, people don't mind paying extra $100. However, once the market shrink, you will face a huge retract of revenue. Worst still, the manufacturers need to served bank debt because they borrow money to expand the business.

Even items like EDM ticket may jack up the price(due to annual scarcity) , it may risk of losing patrons in bad time; too profitable, it will attract competitor enter the market.

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