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: Yale School of Management and NBER

No 21-09, Working Papers from NET Institute

Abstract: We study how organizational boundaries affect pricing decisions using comprehensive data provided by a large U.S. airline. We show that contrary to prevailing theories of the firm, advanced pricing algorithms have multiple biases. To quantify the impacts of these biases, we estimate a structural demand model using sales and search data and 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 addressing all biases simultaneously leads to higher prices and increased dead-weight 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: 56 pages
Date: 2021-10
New Economics Papers: this item is included in nep-com, nep-ore and nep-reg
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Citations: View citations in EconPapers (5)

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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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Persistent link: https://EconPapers.repec.org/RePEc:net:wpaper:2109

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