We study the eciency property of responsive pricing, a scheme that proposes to increase prices as a function of the level of capacity utilization in environments where traditional allocation schemes (e.g. competitive markets, auctions) cannot be implemented in practice. We show that although responsive pricing implements allocations that are arbitrarily close to full capacity utilization (no wasted capacity and no excess demand), these allocations are not always ecient. We identify conditions under which eciency occurs and discuss implications for the use of responsive pricing
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Volume (Year): 34 (2008)
Issue (Month): 2 (February)
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- Harris, Milton & Raviv, Artur, 1981. "A Theory of Monopoly Pricing Schemes with Demand Uncertainty," American Economic Review, American Economic Association, vol. 71(3), pages 347-365, June.
- Mario Pagliero & Pascal Courty, 2004. "Estimating the Welfare Gains from Responsive Pricing: Evidence from an Internet Cafe," 2004 Meeting Papers 877, Society for Economic Dynamics.
- William Vickrey, 1971. "Responsive Pricing of Public Utility Services," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 337-346, Spring.
- 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 215-248, November.
- Barro, Robert J & Romer, Paul M, 1987. "Ski-Lift Pricing, with Applications to Labor and Other," American Economic Review, American Economic Association, vol. 77(5), pages 875-890, December.
- Oren, Shmuel S & Smith, Stephen S & Wilson, Robert B, 1985. "Capacity Pricing," Econometrica, Econometric Society, vol. 53(3), pages 545-566, May.
- MacKie-Mason, J.K. & Varian, H.L., 1993.
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