Dynamic Pricing with Uncertain Capacities

Daniel Garcia, Maarten C. W. Janssen () and Radostina Shopova ()
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Maarten C. W. Janssen: Department of Economics, University of Vienna, 1090 Vienna, Austria; Centre for Economic Policy Research, London EC1V 0DX, United Kingdom
Radostina Shopova: Department of Economics, University of Vienna, 1090 Vienna, Austria; Vienna Graduate School of Economics, 1090 Vienna, Austria

Management Science, 2023, vol. 69, issue 9, 5275-5297

Abstract: In markets, such as those for airline tickets and hotel accommodations, firms sell time-dated products and have private information about unsold capacities. We show that competition under private information may explain observed phenomena, such as increased price dispersion and higher expected prices toward the deadline. We also show that private information severely limits the market power of firms and that information exchange about capacity increases firms’ profits. Finally, we inquire into the incentives to unilaterally disclose information or to engage in espionage about rival’s capacity and show that they increase firms’ profits compared with the private information setting.

Keywords: dynamic pricing; capacity constraints; private information; disclosure; industrial espionage (search for similar items in EconPapers)
Date: 2023
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http://dx.doi.org/10.1287/mnsc.2022.4613 (application/pdf)

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Working Paper: Dynamic Pricing with Uncertain Capacities (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:69:y:2023:i:9:p:5275-5297

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