Dynamic Airline Pricing and Seat Availability: Evidence from Airline Markets

Airfares fluctuate due to demand shocks and intertemporal variation in willingness to pay. I estimate a model of dynamic airline pricing accounting for both sources of price adjustments using flight-level data. I use the model estimates to evaluate the welfare effects of dynamic airline pricing. Relative to uniform pricing, dynamic pricing benefits early-arriving, leisure consumers at the expense of late-arriving, business travelers. Although dynamic pricing ensures seat availability for business travelers, these consumers are then charged higher prices. When aggregated over markets, welfare is higher under dynamic pricing than under uniform pricing. The direction of the welfare effect at the market level depends on whether dynamic price adjustments are mainly driven by demand shocks or by changes in the overall demand elasticity

Dynamic Airline Pricing and Seat Availability

Airfares fluctuate over time due to both demand shocks and intertemporal variation in willingness to pay. I develop and estimate a model of dynamic airline pricing accounting for both forces with new flight-level data. With the model estimates, I disentangle key interactions between the arrival pattern of consumer types and scarcity of remaining capacity due to stochastic demand. I show that dynamic airline pricing expands output by lowering fares charged to early-arriving, price-sensitive customers. It also ensures seats for late-arriving travelers with the highest willingness to pay (e.g. business travelers) who are then charged high prices. I find that dynamic airline pricing increases total welfare relative to a more restrictive pricing regime. Finally, I show that abstracting from stochastic demand results in incorrect inferences regarding the extent to which airlines utilize intertemporal price discrimination

Quantifying substructures in {\it Hubble Frontier Field} clusters: comparison with ΛCDM\Lambda CDM simulations

The Hubble Frontier Fields (HFF) are six clusters of galaxies, all showing indications of recent mergers, which have recently been observed for lensed images. As such they are the natural laboratories to study the merging history of galaxy clusters. In this work, we explore the 2D power spectrum of the mass distribution $P_{\rm M}(k)$ as a measure of substructure. We compare $P_{\rm M}(k)$ of these clusters (obtained using strong gravitational lensing) to that of $\Lambda$CDM simulated clusters of similar mass. To compute lensing $P_{\rm M}(k)$, we produced free-form lensing mass reconstructions of HFF clusters, without any light traces mass (LTM) assumption. The inferred power at small scales tends to be larger if (i)~the cluster is at lower redshift, and/or (ii)~there are deeper observations and hence more lensed images. In contrast, lens reconstructions assuming LTM show higher power at small scales even with fewer lensed images; it appears the small scale power in the LTM reconstructions is dominated by light information, rather than the lensing data. The average lensing derived $P_{\rm M}(k)$ shows lower power at small scales as compared to that of simulated clusters at redshift zero, both dark-matter only and hydrodynamical. The possible reasons are: (i)~the available strong lensing data are limited in their effective spatial resolution on the mass distribution, (ii)~HFF clusters have yet to build the small scale power they would have at $z\sim 0$, or (iii)~simulations are somehow overestimating the small scale power.Comment: 13 pages, 10 figures, 1 table; Accepted for publication in MNRA

Zone Pricing in Retail Oligopoly

We quantify the welfare effects of zone pricing, or setting common prices across distinct markets, in retail oligopoly. Although monopolists can only increase profits by price discriminating, this need not be true when firms face competition. With novel data covering the retail home improvement industry, we find that Home Depot would benefit from finer pricing but that Lowe’s would prefer coarser pricing. Zone pricing softens competition in markets where firms compete, but it shields consumers from higher prices in rural markets, where firms might otherwise exercise market power. Overall, zone pricing produces higher consumer surplus than finer price discrimination does

Zone Pricing in Retail Oligopoly

We quantify the welfare effects of zone pricing, or setting common prices across distinct markets, in retail oligopoly. Although monopolists can only increase profits by price discriminating, this need not be true when firms face competition. With novel data covering the retail home improvement industry, we find that Home Depot would benefit from finer pricing but that Lowe’s would prefer coarser pricing. The use of zone pricing softens competition in markets where firms compete, but it shields consumers from higher prices in markets where firms might otherwise exercise market power. Overall, zone pricing produces higher consumer surplus than finer pricing discrimination does

Zone Pricing in Retail Oligopoly

We quantify the welfare effects of zone pricing, or setting common prices across distinct markets, in retail oligopoly. Although monopolists can only increase profits by price discriminating, this need not be true when firms face competition. With novel data covering the retail home improvement industry, we find that Home Depot would benefit from finer pricing but that Lowe’s would prefer coarser pricing. Zone pricing softens competition in markets where firms compete, but it shields consumers from higher prices in markets where firms might otherwise exercise market power. Overall, zone pricing produces higher consumer surplus than finer pricing discrimination does

Product Variety, Across-Market Demand Heterogeneity, and the Value of Online Retail

Online retail gives consumers access to an astonishing variety of products. However, the additional value created by this variety depends on the extent to which local retailers already satisfy local demand. To quantify the gains and account for local demand, we use detailed data from an online retailer and propose methodology to address a common issue in such data - sparsity of local sales due to sampling and a significant number of local zeros. Our estimates indicate products face substantial demand heterogeneity across markets; as a result, we find gains from online variety that are 30% lower than previous studies

Product Variety, Across-Market Demand Heterogeneity, and the Value of Online Retail

Online retail gives consumers access to an astonishing variety of products. However, the additional value created by this variety depends on the extent to which local retailers already satisfy local demand. To quantify the gains and account for local demand, we use detailed data from an online retailer and propose methodology to address a common issue in such data - sparsity of local sales due to sampling and a significant number of local zeros. Our estimates indicate products face substantial demand heterogeneity across markets; as a result, we find gains from online variety that are 30% lower than previous studies

Product Variety, Across-Market Demand Heterogeneity, and the Value of Online Retail

Online retail gives consumers access to an astonishing variety of products. However, the additional value created by this variety depends on the extent to which local retailers already satisfy local demand. To quantify the gains and account for local demand, we use detailed data from an online retailer and propose methodology to address a common issue in such data-sparsity of local sales due to sampling and a significant number of local zeros. Our estimates indicate products face substantial demand heterogeneity across markets; as a result, we find gains from online variety that are 45% lower than previous studies