Munich Personal RePEc Archive

Estimating Dynamic Demand for Airlines

Diego, Escobari (2014): Estimating Dynamic Demand for Airlines. Forthcoming in: Economics Letters

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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.

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