Working Paper: CEPR ID: DP4036
Authors: Pascal Courty; Mario Pagliero
Abstract: We study the efficiency property of responsive pricing - a scheme first proposed by Vickrey - that increases prices as a function of capacity utilization. We show that although responsive pricing implements allocations that are arbitrarily close to market clearing, these allocations are not always efficient. We identify conditions under which efficiency occurs and discuss implications for the use of responsive pricing.
Keywords: dynamic pricing; real time pricing; responsive pricing
JEL Codes: D45; L97
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Responsive Pricing (D49) | Market Clearing (D41) |
| Responsive Pricing (D49) | Consumer Behavior (D19) |
| Consumer Behavior (D19) | Increased Occupancy (R21) |
| Consumer Behavior (D19) | Reduced Congestion (L91) |
| Nocrossing Condition (C29) | Responsive Pricing Efficiency (D61) |
| Responsive Pricing Efficiency (D61) | Efficient Allocations (D61) |
| Failure of Nocrossing Condition (C29) | Inefficiencies in Responsive Pricing (D49) |