Dynamic Pricing with Uncertain Capacities

Maarten Janssen, Daniel Garcia and Radostina Shopova

No 15767, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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 explains observed phenomena, such as increased price dispersion and higher expected prices towards the deadline, without making specific assumptions about demand. We also show that private information severely limits the market power of firms and that information exchange about capacity negatively affects consumers. Finally, we inquire into the incentives to unilaterally disclose information or to engage in espionage about rival's capacity and show that these activities are particularly harmful for consumers.

Keywords: Dynamic pricing; Capacity constraints; Asymmetric information; Disclosure; Industrial espionage (search for similar items in EconPapers)
JEL-codes: D40 D83 L13 (search for similar items in EconPapers)
Date: 2021-02
New Economics Papers: this item is included in nep-com, nep-ind and nep-reg
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Journal Article: Dynamic Pricing with Uncertain Capacities (2023)
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