Calculating Tier-2 adjustment rates
By definition, tier-2 adjustment rate plans are based on tier-1 adjustment rates. The dynamic pricing for Tier-2 is solely dependent on Tier-1. Conceptually, tier-2 rates are calculated as if the tier-1 adjustment rates were the Base Rates. For example, if the original base rate is $100 and the tier-1 adjustment rate is 10% off the base rate, then the implied tier-1 rate is $90 = ($100 – $100 * 10%). If the tier-2 adjustment rate plan of 9% is based off this tier-1 adjusted rate plan, then the tier-2 rate will be $81.90 = ($90 - $90 * 9%). By convention, dynamic pricing calculation occurs prior to the adjustment calculation. For tier-1 adjustment rate plan, both the base rate and the adjustment rate plan must have the Apply Dynamic Pricing check box selected to enable the adjustment rate plan to be dynamically priced. The following table depicts whether dynamic pricing calculation must be incorporated for the tier-2 adjustment rates based on the Apply Dynamic Pricing settings for the base rate and tier-1 adjustment rates. Note that the Apply Dynamic Pricing setting on the tier-2 adjustment rate plan itself has no effect on the whether dynamic pricing is incorporated in the tier-2 rates.
| Base Rate | Tier-1 Adjustment | Tier-2 Adjustment | Whether Incorporate Dynamic Pricing for Tier-2 |
|---|---|---|---|
| Clear | Clear | either | No, since Tier-1 does not have it . |
| Clear | Selected | either | No, since Tier-1 does not have it because Base Rate is not subject to dynamic pricing. |
| Selected | Selected | either | Yes, since Tier-1 does have it |