Estimating Dynamic Demand for Airlines
12 Pages Posted: 18 Jan 2016 Last revised: 20 Jan 2016
Date Written: April 18, 2014
Abstract
This paper uses an original panel dataset with posted prices and sales to estimate a dynamic demand. We find that consumers become more price sensitive as time to departure nears which is consistent with having lower valuations. This result provides empirical support to a key theoretical implication in Deneckere and Peck [Deneckere, R., Peck, J., 2012. Dynamic competition with random demand and costless search: A theory of price posting. Econometrica 80, 1185-1247] --- high-valuation consumers purchase earlier. We also find that the number of active consumers increases closer to departure.
Keywords: Dynamic demand, Consumers' valuations, Advance purchases, Airlines
JEL Classification: C23, L93, R41
Suggested Citation: Suggested Citation