Economics and Finance Faculty Publications and Presentations

Dynamic Pricing, Advance Sales and Aggregate Demand Learning in Airlines†

Document Type

Article

Publication Date

12-20-2012

Abstract

This paper uses a unique U.S. airlines panel data set to study empirically the dynamic pricing of inventories with uncertain demand over a finite horizon. I estimate a dynamic pricing equation and a dynamic demand equation that jointly characterize the adjustment process between prices and sales as the flight date nears. I find that the price increases as the inventory decreases, and decreases as there is less time to sell. Consistent with aggregate demand learning and price adjustment, demand shocks have a positive and much larger effect on prices than the positive effect of anticipated sales.

Comments

© 2012 Blackwell Publishing Ltd and the Editorial Board of The Journal of Industrial Economics

https://onlinelibrary.wiley.com/share/37DYXM3A9Q6FRBD7YNAD?target=10.1111/joie.12004

Publication Title

J Ind Econ

DOI

10.1111/joie.12004

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