DP4036 Responsive Pricing

Author(s): Pascal Courty, Mario Pagliero
Publication Date: August 2003
Keyword(s): dynamic pricing, L97, real time pricing, responsive pricing
JEL(s): D45
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=4036

We study the efficiency property of responsive pricing - a scheme first proposed by Vickrey - that increases prices as a function of capacity utilization. We show that although responsive pricing implements allocations that are arbitrarily close to market clearing, these allocations are not always efficient. We identify conditions under which efficiency occurs and discuss implications for the use of responsive pricing.