Does Responsive Pricing Increase Efficiency? Evidence from Pricing Experiments in an Internet Café
AbstractResponsive pricing proposes to increase efficiency by introducing a direct linkage between market conditions and changes in prices. This link is established by giving selective discounts that vary in real time as a function of the level of unused capacity. Using data from a unique pricing experiment in Internet cafés, we address the question of whether consumers respond to instantaneous price changes, and whether responsive pricing increases welfare. Our results show that the most responsive scheme in our sample increases occupancy by 11% over peak-load pricing. Welfare increases by an amount that corresponds to 12% of total consumer expenditure.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4149.
Date of creation: Dec 2003
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Find related papers by JEL classification:
- D60 - Microeconomics - - Welfare Economics - - - General
- R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Systems - - - Government Pricing and Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-02-29 (All new papers)
- NEP-EXP-2004-02-29 (Experimental Economics)
- NEP-GEO-2004-02-29 (Economic Geography)
- NEP-MIC-2004-02-29 (Microeconomics)
- NEP-NET-2004-04-11 (Network Economics)
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