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Dynamic Pricing, Advance Sales and Aggregate Demand Learning in Airlines

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  • Diego Escobari

Abstract

This paper uses a unique U.S. airlines panel data set to empirically study 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.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal The Journal of Industrial Economics.

Volume (Year): 60 (2012)
Issue (Month): 4 (December)
Pages: 697-724

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Handle: RePEc:bla:jindec:v:60:y:2012:i:4:p:697-724

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Citations

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Cited by:
  1. Escobari, Diego, 2014. "Estimating dynamic demand for airlines," Economics Letters, Elsevier, vol. 124(1), pages 26-29.
  2. Siegert, Caspar & Ulbricht, Robert, 2014. "Dynamic Oligopoly Pricing: Evidence from the Airline Industry," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 463, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  3. Escobari, Diego & Jindapon, Paan, 2014. "Price Discrimination through Refund Contracts in Airlines," MPRA Paper 53629, University Library of Munich, Germany.
  4. Diego Escobari & Sang-Yeob Lee, 2012. "Demand shifting across flights and airports in a spatial competition model," Letters in Spatial and Resource Sciences, Springer, vol. 5(3), pages 175-183, October.
  5. Escobari Diego & Mollick André Varella, 2013. "Output growth and unexpected government expenditures," The B.E. Journal of Macroeconomics, De Gruyter, vol. 13(1), pages 33, September.
  6. Escobari, Diego & Mellado, Cristhian, 2013. "The Choice of Airport, Airline, and Departure Date and Time: Estimating the Demand for Flights," MPRA Paper 47943, University Library of Munich, Germany.
  7. Escobari, Diego, 2012. "Asymmetric Price Adjustments in Airlines," MPRA Paper 42115, University Library of Munich, Germany.
  8. Escobari, Diego & Lee, Jim, 2013. "Demand Uncertainty and Capacity Utilization in Airlines," MPRA Paper 46059, University Library of Munich, Germany.

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