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Dynamic Pricing, Advance Sales, and Aggregate Demand Learning in Airlines

  • Escobari, Diego

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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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 38509.

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Date of creation: 17 Dec 2011
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Handle: RePEc:pra:mprapa:38509
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