Union Railways: Ad Spot Pricing Dilemma? (B)

Faced with considerable losses and increased pressure to generate alternative sources of funding, Union Railways (UR) twice attempted to auction ad spots at their flagship trains and stations. On both the occasions, the market responded with substantially lower bids than management’s expectation. Surprised by the lackluster response, the management decided to conduct a detailed analysis of the ad spot market and engaged a team of advisers. They were tasked to help UR decide the base price for different types of ad spots (e.g. billboards, window skins, bogie door skins) and to recommend whether the ad spots be sold to either one or multiple intermediaries. Equipped with data (e.g. prevalent market rates and industry best practices) from multiple sources, the advisors faced the daunting task of designing a simple pricing mechanism that can work for multiple types of ad spots