Posted Content•
Competition and Price Dispersion in the U.S. Airline Industry
TL;DR: The authors analyzes dispersion in the prices that an airline charges to different customers on the same route and finds that the expected absolute difference in fares between two of an airline's passengers on a route averages thirty-six percent of the airline's average ticket price on the route.
Abstract: This papers analyzes dispersion in the prices that an airline charges to different customers on the same route. Such variation in airlines fares is substantial: the expected absolute difference in fares between two of an airline's passengers on a route averages thirty-six percent of the airline's average ticket price on the route. The pattern of price dispersion that we find does not seem to be explained solely by cost differences. Dispersion is higher on more competitive routes, possibly reflecting a pattern of discrimination against customers who are less willing to switch to alternative flights or airlines. We argue that the data support an explanation based on theories of price discrimination in monopolistically competitive industries.
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TL;DR: This survey reviews the forty-year history of research on transportation revenue management and covers developments in forecasting, overbooking, seat inventory control, and pricing, as they relate to revenue management.
Abstract: This survey reviews the forty-year history of research on transportation revenue management (also known as yield management). We cover developments in forecasting, overbooking, seat inventory control, and pricing, as they relate to revenue management, and suggest future research directions. The survey includes a glossary of revenue management terminology and a bibliography of over 190 references.
1,162 citations
Book•
07 Jan 2010TL;DR: In this article, the authors present an up-to-date account of modern industrial organization that blends theory with real-world applications, including product bundling, branding strategies, restrictions in vertical supply relationships, intellectual property protection, and two-sided markets.
Abstract: Industrial Organization: Markets and Strategies provides an up-to-date account of modern industrial organization that blends theory with real-world applications. Written in a clear and accessible style, it acquaints the reader with the most important models for understanding strategies chosen by firms with market power and shows how such firms adapt to different market environments. It covers a wide range of topics including recent developments on product bundling, branding strategies, restrictions in vertical supply relationships, intellectual property protection, and two-sided markets, to name just a few. Models are presented in detail and the main results are summarized as lessons. Formal theory is complemented throughout by real-world cases that show students how it applies to actual organizational settings. The book is accompanied by a website containing a number of additional resources for lecturers and students, including exercises, answers to review questions, case material and slides.
488 citations
TL;DR: The authors analyzes airport congestion when carriers are nonatomistic, showing how the results of the road-pricing literature are modified when the economic agents causing congestion have market power, and shows that when an airport is dominated by a monopolist, congestion is fully internalized, yielding no role for congestion pricing under monopoly conditions.
Abstract: This paper analyzes airport congestion when carriers are nonatomistic, showing how the results of the road-pricing literature are modified when the economic agents causing congestion have market power. The analysis shows that when an airport is dominated by a monopolist, congestion is fully internalized, yielding no role for congestion pricing under monopoly conditions. Under a Cournot oligopoly, however, carriers are shown to internalize only the congestion they impose on themselves. A toll that captures the uninternalized portion of congestion may then improve the allocation of traffic. The analysis is supported by some rudimentary empirical evidence.
438 citations
Posted Content•
TL;DR: In this paper, the authors provide a unified treatment of alternative models of information acquisition/transmission that have been advanced to rationalize price dispersion in online and offline markets for homogeneous products.
Abstract: We provide a unified treatment of alternative models of information acquisition/transmission that have been advanced to rationalize price dispersion in online and offline markets for homogeneous products. These different frameworks -- which include sequential search, fixed sample search, and clearinghouse models -- reveal that reductions in (or the elimination of) consumer search costs need not reduce (or eliminate) price dispersion. Our treatment highlights a "duality" between search-theoretic and clearinghouse models of dispersion, and shows how auction-theoretic tools may be used to simplify (and even generalize) existing theoretical results. We conclude with an overview of the burgeoning empirical literature. The empirical evidence suggests that price dispersion in both online and offline markets is sizeable, pervasive, and persistent and does not purely stem from subtle differences in firms' products or services.
403 citations
TL;DR: In this article, the developments in price discrimination theory as it applies to imperfectly competitive markets are surveyed in the areas of first-, second-and third-degree price discrimination, pricing under demand uncertainty, bundling and behavior-based discrimination.
Abstract: This chapter surveys the developments in price discrimination theory as it applies to imperfectly competitive markets. Broad themes and conclusions are discussed in the areas of first-, second- and third-degree price discrimination, pricing under demand uncertainty, bundling and behavior-based discrimination.
397 citations
References
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Book•
01 Jan 1988
TL;DR: The Theory of Industrial Organization as discussed by the authors is the first primary text to treat the new industrial organization at the advanced-undergraduate and graduate level Rigorously analytical and filled with exercises coded to indicate level of difficulty, it provides a unified and modern treatment of the field with accessible models that are simplified to highlight robust economic ideas.
Abstract: The Theory of Industrial Organization is the first primary text to treat the new industrial organization at the advanced-undergraduate and graduate level Rigorously analytical and filled with exercises coded to indicate level of difficulty, it provides a unified and modern treatment of the field with accessible models that are simplified to highlight robust economic ideas while working at an intuitive level To aid students at different levels, each chapter is divided into a main text and supplementary section containing more advanced material Each chapter opens with elementary models and builds on this base to incorporate current research in a coherent synthesis Tirole begins with a background discussion of the theory of the firm In part I he develops the modern theory of monopoly, addressing single product and multi product pricing, static and intertemporal price discrimination, quality choice, reputation, and vertical restraints In part II, Tirole takes up strategic interaction between firms, starting with a novel treatment of the Bertrand-Cournot interdependent pricing problem He studies how capacity constraints, repeated interaction, product positioning, advertising, and asymmetric information affect competition or tacit collusion He then develops topics having to do with long term competition, including barriers to entry, contestability, exit, and research and development He concludes with a "game theory user's manual" and a section of review exercises
9,777 citations
TL;DR: In this article, the authors derived a test for the presence of this effect and for the over-identifying restriction they use; necessary and sufficient conditions for identification of all the parameters in the model; and the asymptotically efficient instrumental variables estimator and conditions under which it differs from the within-groups estimator.
2,812 citations
Journal Article•
TL;DR: In this article, the authors present a systematic treatment of the conceptual framework as well as the practical problems of measurement of inequality, and evaluate alternative approaches in terms of their philosophical assumptions, economic content, and statistical requirements.
Abstract: First published in 1973, this book presents a systematic treatment of the conceptual framework as well as the practical problems of measurement of inequality. Alternative approaches are evaluated in terms of their philosophical assumptions, economic content, and statistical requirements. In a new introduction, Amartya Sen, jointly with James Foster, critically surveys the literature that followed the publication of this book, and also evaluates the main analytical issues in the appraisal of economic inequality and poverty.
1,650 citations
TL;DR: Bargains and Ripoffs: A Model of Monopolistically Competitive Price Dispersion, this paper, is a model of price dispersion that is based on Salop and Stiglitz's model.
Abstract: Bargains and Ripoffs: A Model of Monopolistically Competitive Price DispersionAuthor(s): Steven Salop and Joseph StiglitzSource: The Review of Economic Studies, Vol. 44, No. 3 (Oct., 1977), pp. 493-510Published by: The Review of Economic Studies Ltd.Stable URL: http://www.jstor.org/stable/2296903Accessed: 15/09/2009 15:43
1,092 citations