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Estimating the Welfare Gains from Responsive Pricing: Evidence from an Internet Cafe

Author

Listed:
  • Mario Pagliero
  • Pascal Courty

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

  • 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.
    • Handle: RePEc:red:sed004:877
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    Cited by:

    1. 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.

    More about this item

    Keywords

    Empirical IO;

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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