IDEAS home Printed from https://ideas.repec.org/p/arx/papers/2206.04424.html

Instrument-Free Demand Estimation Using Relative Prices Variation, with an Application to Railway Transportation

Author

Listed:
  • Xavier D'Haultf{oe}uille
  • Ao Wang
  • Philippe F'evrier
  • Lionel Wilner

Abstract

We develop a new identification strategy for demand estimation when cost shifters may not be available and there are substantial variations in demand over time. This approaches relies on a kind of nonlinear difference-in-differences, in which price elasticities are identified by relating changes over time in relative purchases between two goods to changes in their relative prices. We apply this strategy to the context of French railway transportation and estimate price elasticities in line with those obtained on airlines, but more negative than those generally obtained on railway transportation. We then use our demand estimation to compare the current pricing with several counterfactual pricing strategies. Our results suggest similar or better performance of the actual revenue management compared to optimal uniform pricing, but also substantial losses compared to the optimal pricing strategy. Finally, we highlight the key role of revenue management in acquiring information when demand is uncertain.

Suggested Citation

  • Xavier D'Haultf{oe}uille & Ao Wang & Philippe F'evrier & Lionel Wilner, 2022. "Instrument-Free Demand Estimation Using Relative Prices Variation, with an Application to Railway Transportation," Papers 2206.04424, arXiv.org, revised Dec 2025.
    • Handle: RePEc:arx:papers:2206.04424
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/2206.04424
    File Function: Latest version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. S. L. Brumelle & J. I. McGill, 1993. "Airline Seat Allocation with Multiple Nested Fare Classes," Operations Research, INFORMS, vol. 41(1), pages 127-137, February.
    2. Guillermo Gallego & Garrett van Ryzin, 1994. "Optimal Dynamic Pricing of Inventories with Stochastic Demand over Finite Horizons," Management Science, INFORMS, vol. 40(8), pages 999-1020, August.
    3. John Rust & Sungjin Cho, 2018. "Optimal Dynamic Hotel Pricing," 2018 Meeting Papers 179, Society for Economic Dynamics.
    4. Wardman, Mark, 1997. "Inter-urban rail demand, elasticities and competition in Great Britain: Evidence from direct demand models," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 33(1), pages 15-28, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. DHaultfoeuille, Xavier & Wang, Ao & Fevrier, Philippe & Wilner, Lionel, 2022. "Estimating the Gains (and Losses) of Revenue Management," CAGE Online Working Paper Series 621, Competitive Advantage in the Global Economy (CAGE).
    2. Ali Hortacsu & Olivia R. Natan & Hayden Parsley & Timothy Schwieg & Kevin R. Williams, 2021. "Organizational Structure and Pricing: Evidence from a Large U.S. Airline," Cowles Foundation Discussion Papers 2312, Cowles Foundation for Research in Economics, Yale University.
    3. Chatwin, Richard E., 2000. "Optimal dynamic pricing of perishable products with stochastic demand and a finite set of prices," European Journal of Operational Research, Elsevier, vol. 125(1), pages 149-174, August.
    4. Jeffrey I. McGill & Garrett J. van Ryzin, 1999. "Revenue Management: Research Overview and Prospects," Transportation Science, INFORMS, vol. 33(2), pages 233-256, May.
    5. Kalyan Talluri & Garrett van Ryzin, 2000. "Revenue management under general discrete choice model of consumer behavior," Economics Working Papers 533, Department of Economics and Business, Universitat Pompeu Fabra, revised Oct 2001.
    6. Wang, Xiubin & Regan, Amelia, 2006. "Dynamic yield management when aircraft assignments are subject to swap," Transportation Research Part B: Methodological, Elsevier, vol. 40(7), pages 563-576, August.
    7. Pak, K. & Piersma, N., 2002. "airline revenue management," ERIM Report Series Research in Management ERS-2002-12-LIS, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    8. Pak, K. & Piersma, N., 2002. "Airline revenue management: an overview of OR techniques 1982-2001," Econometric Institute Research Papers EI 2002-03, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
    9. Weigand, Robert E., 1999. "Yield management: Filling buckets, papering the house," Business Horizons, Elsevier, vol. 42(5), pages 55-64.
    10. Aniko …ry & Ali Horta su & Kevin Williams, 2022. "Dynamic Price Competition: Theory and Evidence from Airline Markets," Cowles Foundation Discussion Papers 2341R1, Cowles Foundation for Research in Economics, Yale University, revised Apr 2023.
    11. Yigao Liang, 1999. "Solution to the Continuous Time Dynamic Yield Management Model," Transportation Science, INFORMS, vol. 33(1), pages 117-123, February.
    12. Huseyin Topaloglu & S. Ilker Birbil & J. B. G. Frenk & Nilay Noyan, 2012. "Tractable Open Loop Policies for Joint Overbooking and Capacity Control Over a Single Flight Leg with Multiple Fare Classes," Transportation Science, INFORMS, vol. 46(4), pages 460-481, November.
    13. Peter Seele & Claus Dierksmeier & Reto Hofstetter & Mario D. Schultz, 2021. "Mapping the Ethicality of Algorithmic Pricing: A Review of Dynamic and Personalized Pricing," Journal of Business Ethics, Springer, vol. 170(4), pages 697-719, May.
    14. Shelby Brumelle & Darius Walczak, 2003. "Dynamic Airline Revenue Management with Multiple Semi-Markov Demand," Operations Research, INFORMS, vol. 51(1), pages 137-148, February.
    15. Anton J. Kleywegt & Jason D. Papastavrou, 2001. "The Dynamic and Stochastic Knapsack Problem with Random Sized Items," Operations Research, INFORMS, vol. 49(1), pages 26-41, February.
    16. Kyle Y. Lin, 2004. "A sequential dynamic pricing model and its applications," Naval Research Logistics (NRL), John Wiley & Sons, vol. 51(4), pages 501-521, June.
    17. J. Neil Bearden & Ryan O. Murphy & Amnon Rapoport, 2008. "Decision Biases in Revenue Management: Some Behavioral Evidence," Manufacturing & Service Operations Management, INFORMS, vol. 10(4), pages 625-636, June.
    18. Constantinos Maglaras & Joern Meissner, 2006. "Dynamic Pricing Strategies for Multiproduct Revenue Management Problems," Manufacturing & Service Operations Management, INFORMS, vol. 8(2), pages 136-148, July.
    19. Li, Michael Z. F., 2001. "Pricing non-storable perishable goods by using a purchase restriction with an application to airline fare pricing," European Journal of Operational Research, Elsevier, vol. 134(3), pages 631-647, November.
    20. Youyi Feng & Baichun Xiao, 2001. "A Dynamic Airline Seat Inventory Control Model and Its Optimal Policy," Operations Research, INFORMS, vol. 49(6), pages 938-949, December.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:2206.04424. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.