Sensitivity of Prices to Demand Shocks: A Natural Experiment in the San Francisco Bay Area

Volodymyr Bilotkach, Yuriy Gorodnichenko and Oleksandr Talavera ()

No 4, University of East Anglia Applied and Financial Economics Working Paper Series from School of Economics, University of East Anglia, Norwich, UK.

Abstract: We analyze the impact of a freeway interchange collapse in the San Francisco Bay area on the difference in airfare quotes for travel into the area's main airports. The incident temporarily made Oakland airport a less attractive choice for traveling to San Francisco. Using a sample of fare quotes collected on-line we find that fares for travel into Oakland were 6-7 percent lower while the interchange was out of service. Our results imply that the demand-side shock was well absorbed by the supply side, and adjustment of prices and return to the status quo once the shock vanished was swift.

Keywords: natural experiment; price stability; demand shocks; congestion (search for similar items in EconPapers)
JEL-codes: D40 L10 (search for similar items in EconPapers)
Date: 2010-04-21
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Citations: View citations in EconPapers (2)

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Journal Article: Sensitivity of prices to demand shocks: A natural experiment in the San Francisco Bay Area (2012)
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