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Responsive pricing

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  • Pascal Courty

    ()

  • Mario Pagliero

    ()

Abstract

We study the eciency property of responsive pricing, a scheme that proposes to increase prices as a function of the level of capacity utilization in environments where traditional allocation schemes (e.g. competitive markets, auctions) cannot be implemented in practice. We show that although responsive pricing implements allocations that are arbitrarily close to full capacity utilization (no wasted capacity and no excess demand), these allocations are not always ecient. We identify conditions under which eciency occurs and discuss implications for the use of responsive pricing

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File URL: http://hdl.handle.net/10.1007/s00199-006-0173-8
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Bibliographic Info

Article provided by Springer in its journal Economic Theory.

Volume (Year): 34 (2008)
Issue (Month): 2 (February)
Pages: 235-259

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Handle: RePEc:spr:joecth:v:34:y:2008:i:2:p:235-259

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Related research

Keywords: Responsive pricing; Congestion pricing; D60; L50; R48;

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References

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  1. MacKie-Mason, J.K. & Varian, H.L., 1993. "Some Economists of the Internet," Papers 93-16, Michigan - Center for Research on Economic & Social Theory.
  2. Barro, Robert J & Romer, Paul M, 1987. "Ski-Lift Pricing, with Applications to Labor and Other," American Economic Review, American Economic Association, vol. 77(5), pages 875-90, December.
  3. Harris, Milton & Raviv, Artur, 1981. "A Theory of Monopoly Pricing Schemes with Demand Uncertainty," American Economic Review, American Economic Association, vol. 71(3), pages 347-65, June.
  4. Oren, Shmuel S & Smith, Stephen S & Wilson, Robert B, 1985. "Capacity Pricing," Econometrica, Econometric Society, vol. 53(3), pages 545-66, May.
  5. Mario Pagliero & Pascal Courty, 2004. "Estimating the Welfare Gains from Responsive Pricing: Evidence from an Internet Cafe," 2004 Meeting Papers 877, Society for Economic Dynamics.
  6. William Vickrey, 1971. "Responsive Pricing of Public Utility Services," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 337-346, Spring.
  7. Crew, Michael A & Fernando, Chitru S & Kleindorfer, Paul R, 1995. "The Theory of Peak-Load Pricing: A Survey," Journal of Regulatory Economics, Springer, vol. 8(3), pages 215-48, November.
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Citations

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Cited by:
  1. Courty, Pascal & Pagliero, Mario, 2007. "Price Variation Antagonism and Firm Pricing Policies," CEPR Discussion Papers 6663, C.E.P.R. Discussion Papers.
  2. Lindsey, Robin, 2009. "Cost recovery from congestion tolls with random capacity and demand," Journal of Urban Economics, Elsevier, vol. 66(1), pages 16-24, July.
  3. Fabio Musso, 2010. "Innovation in Marketing Channels," Symphonya. Emerging Issues in Management, University of Milano-Bicocca, issue 1 Marketi.
  4. Courty, Pascal & Pagliero, Mario, 2008. "Does Responsive Pricing Smooth Demand Shocks?," CEPR Discussion Papers 6662, C.E.P.R. Discussion Papers.
  5. Lindsey, Robin, 2011. "State-dependent congestion pricing with reference-dependent preferences," Transportation Research Part B: Methodological, Elsevier, vol. 45(10), pages 1501-1526.
  6. Courty, Pascal & Pagliero, Mario, 2003. "Does Responsive Pricing Increase Efficiency? Evidence from Pricing Experiments in an Internet Café," CEPR Discussion Papers 4149, C.E.P.R. Discussion Papers.

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