The hidden information content of price movements
AbstractDynamic patterns of prices in different markets may motivate (strategic) consumers, who could be monitoring price movements over time, to game vendors. Do past price movements carry information about the probability and magnitude of future price drops? Conducting empirical work in the airline industry on near 1000 US domestic routes, we find that some price-metrics carry information about future price swings: these variables can assist in predicting the likelihood and magnitude of price drops. These price-metrics yield significantly different signals which also vary as the prediction horizon changes.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal European Journal of Operational Research.
Volume (Year): 211 (2011)
Issue (Month): 2 (June)
Contact details of provider:
Web page: http://www.elsevier.com/locate/eor
Marketing/operations interface Reference price Price volatility Dynamic pricing Consumer behaviour Airline industry;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Yossi Aviv & Amit Pazgal, 2008. "Optimal Pricing of Seasonal Products in the Presence of Forward-Looking Consumers," Manufacturing & Service Operations Management, INFORMS, vol. 10(3), pages 339-359, December.
- Severin Borenstein & Nancy L. Rose, 1991.
"Competition and Price Dispersion in the U.S. Airline Industry,"
NBER Working Papers
3785, National Bureau of Economic Research, Inc.
- Borenstein, Severin & Rose, Nancy L, 1994. "Competition and Price Dispersion in the U.S. Airline Industry," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 653-83, August.
- Nancy L. Stokey, 1981. "Rational Expectations and Durable Goods Pricing," Bell Journal of Economics, The RAND Corporation, vol. 12(1), pages 112-128, Spring.
- Winer, Russell S, 1986. " A Reference Price Model of Brand Choice for Frequently Purchased Products," Journal of Consumer Research, University of Chicago Press, vol. 13(2), pages 250-56, September.
- Murthi B. P. S. & Haruvy Ernan & Zhang He, 2007. "The Effect of Variability in Price on Consumer Brand Choice," Review of Marketing Science, De Gruyter, vol. 5(1), pages 1-26, November.
- Rao, Akshay R & Sieben, Wanda A, 1992. " The Effect of Prior Knowledge on Price Acceptability and the Type of Information Examined," Journal of Consumer Research, University of Chicago Press, vol. 19(2), pages 256-70, September.
- David Besanko & Wayne L. Winston, 1990. "Optimal Price Skimming by a Monopolist Facing Rational Consumers," Management Science, INFORMS, vol. 36(5), pages 555-567, May.
- Gillen, David & Mantin, Benny, 2009. "Price volatility in the airline markets," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 45(5), pages 693-709, September.
- Kinshuk Jerath & Serguei Netessine & Senthil K. Veeraraghavan, 2010. "Revenue Management with Strategic Customers: Last-Minute Selling and Opaque Selling," Management Science, INFORMS, vol. 56(3), pages 430-448, March.
- Narasimhan, Chakravarthi, 1988. "Competitive Promotional Strategies," The Journal of Business, University of Chicago Press, vol. 61(4), pages 427-49, October.
- Dasu, Sriram & Tong, Chunyang, 2010. "Dynamic pricing when consumers are strategic: Analysis of posted and contingent pricing schemes," European Journal of Operational Research, Elsevier, vol. 204(3), pages 662-671, August.
- Mantin, Benny & Koo, Bonwoo, 2009. "Dynamic price dispersion in airline markets," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 45(6), pages 1020-1029, November.
- Swan, William M. & Adler, Nicole, 2006. "Aircraft trip cost parameters: A function of stage length and seat capacity," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 42(2), pages 105-115, March.
- Gul, Faruk & Sonnenschein, Hugo & Wilson, Robert, 1986.
"Foundations of dynamic monopoly and the coase conjecture,"
Journal of Economic Theory,
Elsevier, vol. 39(1), pages 155-190, June.
- Faruk Gul & Hugo Sonnenschein & Robert Wilson, 2010. "Foundations of Dynamic Monopoly and the Coase Conjecture," Levine's Working Paper Archive 232, David K. Levine.
- Janiszewski, Chris & Lichtenstein, Donald R, 1999. " A Range Theory Account of Price Perception," Journal of Consumer Research, University of Chicago Press, vol. 25(4), pages 353-68, March.
- Stokey, Nancy L, 1979. "Intertemporal Price Discrimination," The Quarterly Journal of Economics, MIT Press, vol. 93(3), pages 355-71, August.
- Stoll, Hans R & Whaley, Robert E, 1990. "Stock Market Structure and Volatility," Review of Financial Studies, Society for Financial Studies, vol. 3(1), pages 37-71.
- Gérard P. Cachon & Robert Swinney, 2009. "Purchasing, Pricing, and Quick Response in the Presence of Strategic Consumers," Management Science, INFORMS, vol. 55(3), pages 497-511, March.
- Frank Bass, 2006. "Variable Pricing in Oligopoly Markets," The Journal of Business, University of Chicago Press, vol. 79(6), pages 2789-2810, November.
- Xuanming Su, 2007. "Intertemporal Pricing with Strategic Customer Behavior," Management Science, INFORMS, vol. 53(5), pages 726-741, May.
- Beckers, Stan, 1981. "Standard deviations implied in option prices as predictors of future stock price variability," Journal of Banking & Finance, Elsevier, vol. 5(3), pages 363-381, September.
- Marcus, Benjamin & Anderson, Chris K., 2008. "Revenue management for low-cost providers," European Journal of Operational Research, Elsevier, vol. 188(1), pages 258-272, July.
- Varian, Hal R, 1980. "A Model of Sales," American Economic Review, American Economic Association, vol. 70(4), pages 651-59, September.
- Coase, Ronald H, 1972. "Durability and Monopoly," Journal of Law and Economics, University of Chicago Press, vol. 15(1), pages 143-49, April.
- Mark Britten-Jones & Anthony Neuberger, 2000. "Option Prices, Implied Price Processes, and Stochastic Volatility," Journal of Finance, American Finance Association, vol. 55(2), pages 839-866, 04.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.