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A Test of Monopoly Price Dispersion Under Demand Uncertainty

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  • Humphreys, Brad

    ()
    (University of Alberta, Department of Economics)

  • Soebbing, Brian

    ()
    (University of Alberta, Physical Education and Recreation)

Abstract

Dana (2001) developed a model of price dispersion under demand uncertainty. The model predicts that, in the face of uncertain demand and inflexible prices, monopolists maximizes pro fits using ex ante price discrimination. We test the predictions of this model using a unique data set from Major League Baseball (MLB). Estimation of a two-way fixed effects model indicate that ticket price dispersion changes systematically with demand uncertainty in MLB, verifying the predictions of the model.

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Bibliographic Info

Paper provided by University of Alberta, Department of Economics in its series Working Papers with number 2010-19.

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Length: 10 pages
Date of creation: 07 Dec 2010
Date of revision:
Handle: RePEc:ris:albaec:2010_019

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Keywords: price dispersion; demand uncertainty; sports;

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  1. 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.
  2. Carlson, John A & McAfee, R Preston, 1983. "Discrete Equilibrium Price Dispersion," Journal of Political Economy, University of Chicago Press, vol. 91(3), pages 480-93, June.
  3. James D. Dana Jr., 1999. "Equilibrium Price Dispersion Under Demand Uncertainty: The Roles of Costly Capacity and Market Structure," RAND Journal of Economics, The RAND Corporation, vol. 30(4), pages 632-660, Winter.
  4. Stahl, Dale O, II, 1989. "Oligopolistic Pricing with Sequential Consumer Search," American Economic Review, American Economic Association, vol. 79(4), pages 700-712, September.
  5. George J. Stigler, 1961. "The Economics of Information," Journal of Political Economy, University of Chicago Press, vol. 69, pages 213.
  6. Rodney Fort, 2004. "Inelastic sports pricing," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 25(2), pages 87-94.
  7. Pascal Courty, 2003. "Some Economics of Ticket Resale," Journal of Economic Perspectives, American Economic Association, vol. 17(2), pages 85-97, Spring.
  8. Salop, S & Stiglitz, J E, 1982. "The Theory of Sales: A Simple Model of Equilibrium Price Dispersion with Identical Agents," American Economic Review, American Economic Association, vol. 72(5), pages 1121-30, December.
  9. Dana, James D, Jr, 2001. "Monopoly Price Dispersion under Demand Uncertainty," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(3), pages 649-70, August.
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