Working Paper: CEPR ID: DP6662
Authors: Pascal Courty; Mario Pagliero
Abstract: Using data from a unique pricing experiment, we investigate Vickrey?s conjecture that responsive pricing can be used to smooth both predictable and unpredictable demand shocks. Our evidence shows that increasing the responsiveness of price to demand conditions reduces the magnitude of deviations in capacity utilization rates from a pre-determined target level. A 10 percent increase in price variability leads to a decrease in the variability of capacity utilization rates between 2 and 6 percent. We discuss implications for the use of demand-side incentives to deal with congestible resources.
Keywords: capacity utilization; consumer demand; price variability; responsive pricing
JEL Codes: D01; D12; L11; L86
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| price variability (L11) | capacity utilization rates (L97) |
| responsive pricing (D49) | variability of capacity utilization rates (D24) |
| price variability (L11) | occupancy variability (R21) |
| responsive pricing (D49) | occupancy rates (R21) |