Dynamic Airline Pricing and Seat Availability

Kevin R. Williams ()
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Kevin R. Williams: Cowles Foundation, Yale University, http://kevinrwilliams.com/

No 2103, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: Airfares are determined by both intertemporal price discrimination and dynamic adjustment to stochastic demand. I estimate a model of dynamic airline pricing accounting for both forces with new flight-level data. With model estimates, I disentangle key interactions between the arrival pattern of consumer types and remaining capacity under stochastic demand. I show that the forces are complements in airline markets and lead to significantly higher revenues, as well as increased consumer surplus, compared to a more restrictive pricing regime. Finally, I show that abstracting from stochastic demand leads to a systematic bias in estimating demand elasticities.

Keywords: Dynamic pricing; Intertemporal price discrimination; Price discrimination; Stochastic demand; Pricing; Airlines; Dynamic discrete choice (search for similar items in EconPapers)
JEL-codes: L11 L12 L93 (search for similar items in EconPapers)
Pages: 55 pages
Date: 2017-08
New Economics Papers: this item is included in nep-com, nep-mkt, nep-ore, nep-reg and nep-tre
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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