Sensitivity of Prices to Demand Shocks: A Natural Experiment in the San Francisco Bay Area
AbstractWe analyze the impact of a freeway interchange collapse in the San Francisco Bay area on the difference in airfare quotes for travel into the area's main airports. The incident temporarily made Oakland airport a less attractive choice for traveling to San Francisco. Using a sample of fare quotes collected on-line we find that fares for travel into Oakland were 6-7 percent lower while the interchange was out of service. Our results imply that the demand-side shock was well absorbed by the supply side, and adjustment of prices and return to the status quo once the shock vanished was swift.
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Bibliographic InfoPaper provided by School of Economics, University of East Anglia, Norwich, UK. in its series University of East Anglia Applied and Financial Economics Working Paper Series with number 004.
Date of creation: 21 Apr 2010
Date of revision:
Postal: Helen Chapman, School of Economics, University of East Anglia, Norwich Research Park, Norwich, NR4 7TJ, UK
Other versions of this item:
- Bilotkach, Volodymyr & Gorodnichenko, Yuriy & Talavera, Oleksandr, 2012. "Sensitivity of prices to demand shocks: A natural experiment in the San Francisco Bay Area," Transportation Research Part A: Policy and Practice, Elsevier, vol. 46(7), pages 1137-1151.
- D40 - Microeconomics - - Market Structure and Pricing - - - General
- L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
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