Organizational Structure and Pricing: Evidence from a Large U.S. Airline

Ali Hortacsu, Olivia R. Natan, Hayden Parsley, Timothy Schwieg and Kevin R. Williams ()
Additional contact information
Olivia R. Natan: University of California, Berkeley
Hayden Parsley: University of Texas, Austin
Timothy Schwieg: University of Chicago, Booth
Kevin R. Williams: Cowles Foundation, Yale University, https://som.yale.edu/faculty/kevin-r-williams

No 2312, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We study how organizational boundaries affect pricing decisions using comprehensive data from a large U.S. airline. We document that the firm's advanced pricing algorithm, utilizing inputs from different organizational teams, is subject to multiple biases. To quantify the impacts of these biases, we estimate a structural demand model using sales and search data. We recover the demand curves the firm believes it faces using forecasting data. In counterfactuals, we show that correcting biases introduced by organizational teams individually have little impact on market outcomes, but coordinating organizational outcomes leads to higher prices/revenues and increased deadweight loss in the markets studied.

Keywords: Pricing Frictions; Organizational Inertia; Dynamic Pricing; Revenue Management; Behavioral IO (search for similar items in EconPapers)
JEL-codes: C11 C53 D22 D42 L10 L93 (search for similar items in EconPapers)
Pages: 57 pages
Date: 2021-11
New Economics Papers: this item is included in nep-com and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Organizational Structure and Pricing: Evidence from a Large U.S. Airline (2022)
Working Paper: Organizational Structure and Pricing: Evidence from a Large U.S. Airline (2021)
Working Paper: Organizational Structure and Pricing: Evidence from a Large U.S. Airline (2021)
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