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Responsive pricing

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  • Pascal Courty
  • Mario Pagliero

Abstract

We study the eciency property of responsive pricing, a scheme that proposes to increase prices as a function of the level of capacity utilization in environments where traditional allocation schemes (e.g. competitive markets, auctions) cannot be implemented in practice. We show that although responsive pricing implements allocations that are arbitrarily close to full capacity utilization (no wasted capacity and no excess demand), these allocations are not always ecient. We identify conditions under which eciency occurs and discuss implications for the use of responsive pricing
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Suggested Citation

  • Pascal Courty & Mario Pagliero, 2008. "Responsive pricing," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 34(2), pages 235-259, February.
    • Handle: RePEc:spr:joecth:v:34:y:2008:i:2:p:235-259
    DOI: 10.1007/s00199-006-0173-8
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    References listed on IDEAS

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    1. Harris, Milton & Raviv, Artur, 1981. "A Theory of Monopoly Pricing Schemes with Demand Uncertainty," American Economic Review, American Economic Association, vol. 71(3), pages 347-365, June.
    2. William Vickrey, 1971. "Responsive Pricing of Public Utility Services," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 337-346, Spring.
    3. Barro, Robert J & Romer, Paul M, 1987. "Ski-Lift Pricing, with Applications to Labor and Other," American Economic Review, American Economic Association, vol. 77(5), pages 875-890, December.
    4. MacKie-Mason, J.K. & Varian, H.L., 1993. "Some Economists of the Internet," Papers 93-16, Michigan - Center for Research on Economic & Social Theory.
    5. Mario Pagliero & Pascal Courty, 2004. "Estimating the Welfare Gains from Responsive Pricing: Evidence from an Internet Cafe," 2004 Meeting Papers 877, Society for Economic Dynamics.
    6. Crew, Michael A & Fernando, Chitru S & Kleindorfer, Paul R, 1995. "The Theory of Peak-Load Pricing: A Survey," Journal of Regulatory Economics, Springer, vol. 8(3), pages 215-248, November.
    7. Oren, Shmuel S & Smith, Stephen S & Wilson, Robert B, 1985. "Capacity Pricing," Econometrica, Econometric Society, vol. 53(3), pages 545-566, May.
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    Cited by:

    1. Pascal Courty & Mario Pagliero, 2011. "Does responsive pricing smooth demand shocks?," Applied Economics, Taylor & Francis Journals, vol. 43(30), pages 4707-4721.
    2. Courty, Pascal & Pagliero, Mario, 2010. "Price variation antagonism and firm pricing policies," Journal of Economic Behavior & Organization, Elsevier, vol. 75(2), pages 235-249, August.
    3. Dobromir Stoyanov, 2021. "Marketing of vending channels: a case of French university campuses," Post-Print hal-03812781, HAL.
    4. Lindsey, Robin, 2009. "Cost recovery from congestion tolls with random capacity and demand," Journal of Urban Economics, Elsevier, vol. 66(1), pages 16-24, July.
    5. Courty, Pascal & Pagliero, Mario, 2003. "Does Responsive Pricing Increase Efficiency? Evidence from Pricing Experiments in an Internet Café," CEPR Discussion Papers 4149, C.E.P.R. Discussion Papers.
    6. Fabio Musso, 2010. "Innovation in Marketing Channels," Symphonya. Emerging Issues in Management, Niccolò Cusano University, issue 1 Marketi.

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    More about this item

    Keywords

    Responsive pricing; Congestion pricing; D60; L50; R48;
    All these keywords.

    JEL classification:

    • D60 - Microeconomics - - Welfare Economics - - - General
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy

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