Abstract When a firm can sell multiple units before any price adjustment takes place, three forces may affect the pricing of the inventory over time: perishability drives prices down, scarcity shifts prices up, and intertemporal price discrimination raises prices. Hidden prices arise because each unit, even if not immediately up for sale, is assigned a price. Airline fares collected for the analysis empirically show the existence of each force. The price of each seat tends to decrease over time, except few days before departure; at any point in time, fares are increasing in the sequential order of sale of the seats.

    Highlights We identify three forces responsible for Dynamic Pricing. A revenue-maximizing model shows their predicted impact. Capacity pricing pushes prices up. Perishability and price discrimination have opposite effect. When instantaneous adjustment is not possible, it is optimal to set a price for all inventory.


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    Title :

    Hidden prices with fixed inventory: Evidence from the airline industry


    Contributors:


    Publication date :

    2022-01-01


    Size :

    20 pages




    Type of media :

    Article (Journal)


    Type of material :

    Electronic Resource


    Language :

    English




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