Does Responsive Pricing Smooth Demand Shocks?
AbstractUsing data from a unique pricing experiment, we investigate Vickrey’s conjecture that responsive pricing can be used to smooth both predictable and unpredictable demand shocks. Our evidence shows that increasing the responsiveness of price to demand conditions reduces the magnitude of deviations in capacity utilization rates from a pre-determined target level. A 10 percent increase in price variability leads to a decrease in the variability of capacity utilization rates between 2 and 6 percent. We discuss implications for the use of demand-side incentives to deal with congestible resources.
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 InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6662.
Date of creation: Jan 2008
Date of revision:
Contact details of provider:
Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
Other versions of this item:
- D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-04-12 (All new papers)
- NEP-MIC-2008-04-12 (Microeconomics)
- NEP-MKT-2008-04-12 (Marketing)
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.:
- Peter M. Schwarz & Thomas N. Taylor & Matthew Birmingham & Shana L. Dardan, 2002. "Industrial Response to Electricity Real-Time Prices: Short Run and Long Run," Economic Inquiry, Western Economic Association International, vol. 40(4), pages 597-610, October.
- Aubin, Christophe & Fougère, Denis & Husson, Emmanuel & Ivaldi, Marc, 1994.
"Real-Time Pricing of Electricity of Residential Customers: Econometric Analysis of an Experiment,"
IDEI Working Papers
46, Institut d'Économie Industrielle (IDEI), Toulouse.
- Aubin, Christophe, et al, 1995. "Real-Time Pricing of Electricity for Residential Customers: Econometric Analysis of an Experiment," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 10(S), pages S171-91, Suppl. De.
- repec:dgr:uvatin:2000101 is not listed on IDEAS
- Herriges, Joseph A. & Baladi, S. M. & Caves, Douglas W. & Neenan, B. F., 1993.
"The Response of Industrial Customers to Electric Rates Based Upon Dynamic Marginal Costs,"
Staff General Research Papers
1497, Iowa State University, Department of Economics.
- Herriges, Joseph A, et al, 1993. "The Response of Industrial Customers to Electric Rates Based upon Dynamic Marginal Costs," The Review of Economics and Statistics, MIT Press, vol. 75(3), pages 446-54, August.
- Pascal Courty & Mario Pagliero, 2006.
"Price Variation Antagonism and Firm Pricing Policies,"
Economics Working Papers
ECO2006/27, European University Institute.
- Courty, Pascal & Pagliero, Mario, 2010. "Price variation antagonism and firm pricing policies," Journal of Economic Behavior & Organization, Elsevier, vol. 75(2), pages 235-249, August.
- Courty, Pascal & Pagliero, Mario, 2007. "Price Variation Antagonism and Firm Pricing Policies," CEPR Discussion Papers 6663, C.E.P.R. Discussion Papers.
- Pascal Courty & Mario Pagliero, 2008. "Price Variation Antagonism and Firm Pricing Policies," Economics Working Papers ECO2008/02, European University Institute.
- Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, vol. 46(1), pages 33-50, January.
- Eugenio J. Miravete, 2003. "Choosing the Wrong Calling Plan? Ignorance and Learning," American Economic Review, American Economic Association, vol. 93(1), pages 297-310, March.
- Robert H. Patrick & Frank A. Wolak, 2001. "Estimating the Customer-Level Demand for Electricity Under Real-Time Market Prices," NBER Working Papers 8213, National Bureau of Economic Research, Inc.
- Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard, 1986. "Fairness as a Constraint on Profit Seeking: Entitlements in the Market," American Economic Review, American Economic Association, vol. 76(4), pages 728-41, September.
- C. Robin Lindsey & Erik T. Verhoef, 2000. "Traffic Congestion and Congestion Pricing," Tinbergen Institute Discussion Papers 00-101/3, Tinbergen Institute.
- 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.
- Severin Borenstein & Nancy L. Rose, 1995. "Competition and Price Dispersion in the U.S. Airline Industry," NBER Working Papers 3785, National Bureau of Economic Research, Inc.
- 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.
- William Vickrey, 1971. "Responsive Pricing of Public Utility Services," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 337-346, Spring.
- Courty, Pascal & Pagliero, Mario, 2003.
CEPR Discussion Papers
4036, C.E.P.R. Discussion Papers.
- Thomas Taylor & Peter Schwarz, 2000. "Advance notice of real-time electricity prices," Atlantic Economic Journal, International Atlantic Economic Society, vol. 28(4), pages 478-488, December.
- 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.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.