Dynamic pricing with uncertain capacities

Daniel Garcia, Maarten Janssen, Radostina Shopova

Publications: Contribution to journalArticlePeer Reviewed

Abstract

In markets, such as those for airline tickets and hotel accommodations, firms sell time-dated products and have private information about unsold capacities. We show that competition under private information may explain observed phenomena, such as increased price dispersion and higher expected prices toward the deadline. We also show that private information severely limits the market power of firms and that information exchange about capacity increases firms’ profits. Finally, we inquire into the incentives to unilaterally disclose information or to engage in espionage about rival’s capacity and show that they increase firms’ profits compared with the private information setting.

Original languageEnglish
Pages (from-to)5275-5297
Number of pages23
JournalManagement Science
Volume69
Issue number9
DOIs
Publication statusPublished - Sep 2023

Austrian Fields of Science 2012

  • 502013 Industrial economics
  • 502021 Microeconomics

Keywords

  • HBE
  • Cat1
  • disclosure
  • industrial espionage
  • private information
  • capacity constraints
  • dynamic pricing

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