Marginal Cost Pricing When Spot Markets Are Complete

Eden, Benjamin

doi:10.1086/261735

Cited by 74 publications

(65 citation statements)

References 6 publications

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“…However, as suggested by various theoretical models (e.g., Eden (1990), Gale and Holmes (1992), Dana (1998), Dana (1999a), Dana (1999b) and empirical evidence (e.g., Stavins (2001), Escobari and Gan (2007)) carriers have various reasons to set lower fares for earlier purchasers and higher fares for later purchasers. 4 Under this pricing strategy, higher fares in Thanksgiving may 4 Lower fares for earlier purchasers is consistent with Gallego and van Ryzin (1994) and Zhao and Zheng (2000) if assuming that later purchasers have a higher reservation price.…”

Section: Resultsmentioning

confidence: 99%

Systematic peak-load pricing, congestion premia and demand diverting: Empirical evidence

Escobari

2009

Economics Letters

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. www.econstor.eu Terms of use: Documents in EconStor may

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Section: Resultsmentioning

confidence: 99%

Systematic peak-load pricing, congestion premia and demand diverting: Empirical evidence

Escobari

2009

Economics Letters

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“…However, the equilibrium would be different if search costs were finite. In particular, when search costs are zero, equilibrium prices exhibit price dispersion (see Prescott, 1976, Eden, 1990, and Dana, 1994. In such models firms do not compete in availability since consumers can move freely between firms.…”

Section: Consumersmentioning

confidence: 99%

“…2 I use inventory and capacity interchangeably to describe a firm's output decision when it must choose its output before its demand is known. 3 Price rigidities alone introduce the possibility of industry wide stockouts (see Prescott, 1976, Eden, 1990, Deneckere, Marvel, and Peck, 1996, and Dana, 1994, but costly search causes consumers to care about individual firms' stockout rates. 4 See also Bryant (1980) and Gould (1978).…”

Section: Introductionmentioning

confidence: 99%

Competition in Price and Availability When Availability is Unobservable

Dana¹

2001

The RAND Journal of Economics

100

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This paper presents a strategic model of competition in both price and availability when firms can publicly commit to prices but not inventories (or capacities). Demand is uncertain and firms may stock out in equilibrium. Consumers choose where to shop given the price and expected availability at each firm (the probability of being served). In a one period model, I show that firms can use higher prices to "signal" higher availability (regardless of whether price or inventory is chosen first). This generates a floor on equilibrium prices and industry profits that exists regardless of the number of firms in the industry. In a repeated game, firms that maintain reputations for higher service rates may earn even higher profits. The model sheds light on the relationship between price, availability, and reputations in the video rental industry. † Associate Professor,

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“…First, if the carrier is constrained by capacity, then as more flights reach full capacity, the expense of an additional passenger becomes very large as either a bigger aircraft or an extra flight is needed to supply the extra seat-mile. Eden (1990) shows that effect can induce price dispersion to rise in periods of peak demand when full capacity is reached. Second, wages of crew and maintenance workers are apt to rise during booms in the cycle, which would cause marginal costs to rise.…”

Section: Capacity and Marginal Costmentioning

confidence: 99%

Price Discrimination and Business-Cycle Risk

et al. 2011

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A parsimonious theoretical model of second degree price discrimination suggests that the business cycle will affect the degree to which firms are able to price discriminate between different consumer types. We analyze price dispersion in the airline industry to assess how price discrimination can expose airlines to aggregatedemand fluctuations. Performing a panel analysis on 17 years of data covering two business cycles, we find that price dispersion is highly pro-cyclical. Estimates show that a rise in the output gap of one percentage point is associated with a 1.9 percent increase in the interquartile range of the price distribution in a market. These results suggest that markups move pro-cyclically in the airline industry, such that during booms in the cycle, firms can significantly raise the markup charged to those with a high willingness-to-pay. The analysis suggests that this impact on firms' ability to price discriminate results in additional profit risk, over and above the risk that comes from variations in cost. * We thank

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Marginal Cost Pricing When Spot Markets Are Complete

Cited by 74 publications

References 6 publications

Systematic peak-load pricing, congestion premia and demand diverting: Empirical evidence

Systematic peak-load pricing, congestion premia and demand diverting: Empirical evidence

Competition in Price and Availability When Availability is Unobservable

Price Discrimination and Business-Cycle Risk

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