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Does Responsive Pricing Increase Efficiency? Evidence from Pricing Experiments in an Internet Café

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  • Courty, Pascal
  • Pagliero, Mario

Abstract

Responsive pricing proposes to increase efficiency by introducing a direct linkage between market conditions and changes in prices. This link is established by giving selective discounts that vary in real time as a function of the level of unused capacity. Using data from a unique pricing experiment in Internet cafés, we address the question of whether consumers respond to instantaneous price changes, and whether responsive pricing increases welfare. Our results show that the most responsive scheme in our sample increases occupancy by 11% over peak-load pricing. Welfare increases by an amount that corresponds to 12% of total consumer expenditure.

Suggested Citation

  • 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.
    • Handle: RePEc:cpr:ceprdp:4149
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    References listed on IDEAS

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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.

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    More about this item

    Keywords

    Responsive pricing;

    JEL classification:

    • D60 - Microeconomics - - Welfare Economics - - - General
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy

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