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Responsive Pricing

Author

Listed:
  • Courty, Pascal
  • Pagliero, Mario

Abstract

We study the efficiency property of responsive pricing - a scheme first proposed by Vickrey - that increases prices as a function of capacity utilization. We show that although responsive pricing implements allocations that are arbitrarily close to market clearing, these allocations are not always efficient. We identify conditions under which efficiency occurs and discuss implications for the use of responsive pricing.

Suggested Citation

  • Courty, Pascal & Pagliero, Mario, 2003. "Responsive Pricing," CEPR Discussion Papers 4036, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:4036
    as

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    File URL: http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=4036
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    Other versions of this item:

    • Pascal Courty & Mario Pagliero, 2008. "Responsive pricing," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 34(2), pages 235-259, February.

    References listed on IDEAS

    as
    1. 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.
    2. 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.
    3. William Vickrey, 1971. "Responsive Pricing of Public Utility Services," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 337-346, Spring.
    4. 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.
    5. 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.
    6. Oren, Shmuel S & Smith, Stephen S & Wilson, Robert B, 1985. "Capacity Pricing," Econometrica, Econometric Society, vol. 53(3), pages 545-566, May.
    7. MacKie-Mason, J.K. & Varian, H.L., 1993. "Some Economists of the Internet," Papers 93-16, Michigan - Center for Research on Economic & Social Theory.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Courty, Pascal & Pagliero, Mario, 2010. "Price variation antagonism and firm pricing policies," Journal of Economic Behavior & Organization, Elsevier, vol. 75(2), pages 235-249, August.
    2. Lindsey, Robin, 2009. "Cost recovery from congestion tolls with random capacity and demand," Journal of Urban Economics, Elsevier, vol. 66(1), pages 16-24, July.
    3. Pascal Courty & Mario Pagliero, 2011. "Does responsive pricing smooth demand shocks?," Applied Economics, Taylor & Francis Journals, vol. 43(30), pages 4707-4721.
    4. Courty, Pascal & Pagliero, Mario, 2003. "Does Responsive Pricing Increase Efficiency? Evidence from Pricing Experiments in an Internet Café," CEPR Discussion Papers 4149, C.E.P.R. Discussion Papers.
    5. Fabio Musso, 2010. "Innovation in Marketing Channels," Symphonya. Emerging Issues in Management, University of Milano-Bicocca, issue 1 Marketi.

    More about this item

    Keywords

    dynamic pricing; L97; real time pricing; responsive pricing;

    JEL classification:

    • D45 - Microeconomics - - Market Structure, Pricing, and Design - - - Rationing; Licensing

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