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Dynamic Pricing, Advance Sales and Aggregate Demand Learning in Airlines

  • Diego Escobari

This paper uses a unique U.S. airlines panel data set to empirically study the dynamic pricing of inventories with uncertain demand over a finite horizon. I estimate a dynamic pricing equation and a dynamic demand equation that jointly characterize the adjustment process between prices and sales as the flight date nears. I find that the price increases as the inventory decreases, and decreases as there is less time to sell. Consistent with aggregate demand learning and price adjustment, demand shocks have a positive and much larger effect on prices than the positive effect of anticipated sales.

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File URL: http://hdl.handle.net/10.1111/10.1111/joie.2012.60.issue-4
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Article provided by Wiley Blackwell in its journal The Journal of Industrial Economics.

Volume (Year): 60 (2012)
Issue (Month): 4 (December)
Pages: 697-724

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Handle: RePEc:bla:jindec:v:60:y:2012:i:4:p:697-724
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