Estimating Dynamic Demand for Airlines

12 Pages Posted: 18 Jan 2016 Last revised: 20 Jan 2016

See all articles by Diego Escobari

Diego Escobari

The University of Texas-Rio Grande Valley; Texas A&M University - Department of Economics

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

Escobari, Diego, Estimating Dynamic Demand for Airlines (April 18, 2014). Economics Letters, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2717442 or http://dx.doi.org/10.2139/ssrn.2717442

Diego Escobari (Contact Author)

The University of Texas-Rio Grande Valley ( email )

1201 West University Dr.
Edinburg, TX 78539
United States

HOME PAGE: http://https://faculty.utrgv.edu/diego.escobari/

Texas A&M University - Department of Economics ( email )

5201 University Blvd.
College Station, TX 77843-4228
United States

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