Author : Nan Chen
Publisher :
Page : 50 pages
File Size : 17,55 MB
Release : 2019
Category :
ISBN :
Dynamic pricing is increasingly popular in the perishable good markets, but its effect under competition is uncertain due to the potential for the prisoner's dilemma. I study profit and welfare implications of dynamic pricing techniques in a competitive setting. I construct a structural dynamic oligopoly model where capacitated firms compete in selling differentiated products over a finite horizon when facing demand fluctuations. I estimate the model in U.S. oligopolistic airline markets using an event of carrier exit and flight-level data. I find that (i) the ability to smooth demand fluctuations intensifies competition and benefits consumers substantially; (ii) the ability to price discriminate softens competition and allows firms to extract a substantial amount of consumer surplus.