Hidden prices with fixed inventory: Evidence from the airline industry

Marco Alderighi, Alberto Gaggero and Claudio A. Piga

Transportation Research Part B: Methodological, 2022, vol. 157, issue C, 42-61

Abstract: When a firm can sell multiple units before any price adjustment takes place, three forces may affect the pricing of the inventory over time: perishability drives prices down, scarcity shifts prices up, and intertemporal price discrimination raises prices. Hidden prices arise because each unit, even if not immediately up for sale, is assigned a price. Airline fares collected for the analysis empirically show the existence of each force. The price of each seat tends to decrease over time, except few days before departure; at any point in time, fares are increasing in the sequential order of sale of the seats.

Keywords: Airlines; Dynamic pricing; Revenue management (search for similar items in EconPapers)
JEL-codes: D22 L11 L93 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: The hidden side of dynamic pricing in airline markets (2016)
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DOI: 10.1016/j.trb.2022.01.001

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