Price response
How the chance that a customer accepts an offer changes as its price changes, estimated per segment from past quotes.
Category
How a model is chosen and adapted
Related terms
Price response is how the probability that a customer accepts an offer changes as its price changes, estimated from past quotes, including the ones that were declined or not taken.
Why it matters for pricing
A rate grid built from risk and funding cost alone says what a loan must earn, not how each segment reacts to price. Without price response, discounts go to customers who would have accepted the list rate, and good customers are lost over small differences. With it, a profit model can weigh acceptance against margin and against the extra risk a higher price can attract.
What it does not decide
The model proposes; the policy bounds it. A cost floor, legal caps, a rule that excludes protected attributes and their proxies, and the pricing committee's sign-off all sit outside it, and a relationship manager moves only inside an agreed band. The risk-based pricing use case shows price response feeding a constrained optimizer.
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