Working Paper: CEPR ID: DP4149
Authors: Pascal Courty; Mario Pagliero
Abstract: Responsive pricing proposes to increase efficiency by introducing a direct linkage between market conditions and changes in prices. This link is established by giving selective discounts that vary in real time as a function of the level of unused capacity. Using data from a unique pricing experiment in Internet cafés, we address the question of whether consumers respond to instantaneous price changes, and whether responsive pricing increases welfare. Our results show that the most responsive scheme in our sample increases occupancy by 11% over peak-load pricing. Welfare increases by an amount that corresponds to 12% of total consumer expenditure.
Keywords: Responsive Pricing
JEL Codes: D60; R48
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| responsive pricing (D49) | occupancy rates (R21) |
| responsive pricing (D49) | consumer welfare (D69) |
| occupancy rates (R21) | consumer welfare (D69) |