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A Model of Dynamic Limit Pricing with an Application to the Airline Industry

Gedge, Christopher; Roberts, James W.; Sweeting, Andrew - National Bureau of Economic Research (NBER) - 2014

The one-shot nature of most theoretical models of strategic investment, especially those based on asymmetric information, limits our ability to test whether they can fit the data. We develop a dynamic version of the classic Milgrom and Roberts (1982) model of limit pricing, where a monopolist...

Persistent link: https://www.econbiz.de/10010796729

Imperfect Competition in Selection Markets

Mahoney, Neale; Weyl, E. Glen - National Bureau of Economic Research (NBER) - 2014

subprime auto lending calibrated to Einav, Jenkins and Levin (2012), realistic levels of competition among lenders generate a … significant oversupply of credit, implying greater market power is desirable. We build a model of symmetric imperfect competition …-theoretic reasoning to provide a general analysis of the interaction between selection and imperfect competition. We use the same logic to …

Persistent link: https://www.econbiz.de/10010890106

The Smart Grid, Entry, and Imperfect Competition in Electricity Markets

Allcott, Hunt - National Bureau of Economic Research (NBER) - 2012

Most US consumers are charged a near-constant retail price for electricity, despite substantial hourly variation in the wholesale market price. The Smart Grid is a set of emerging technologies that, among other effects, will facilitate "real-time pricing" for electricity and increase price...

Persistent link: https://www.econbiz.de/10011271447

Sunk Costs and Risk-Based Barriers to Entry

Pindyck, Robert S. - National Bureau of Economic Research (NBER) - 2009

In merger analysis and other antitrust settings, risk is often cited as a potential barrier to entry. But there is little consensus as to the kinds of risk that matter - systematic versus non-systematic and industry-wide versus firm-specific - and the mechanisms through which they affect entry....

Persistent link: https://www.econbiz.de/10005777752

Sunk Costs and Real Options in Antitrust

Pindyck, Robert S. - National Bureau of Economic Research (NBER) - 2005

Sunk costs play a central role in antitrust economics, but are often misunderstood and mismeasured. I will try to clarify some of the conceptual and empirical issues related to sunk costs, and explain their implications for antitrust analysis. I will be particularly concerned with the role of...

Persistent link: https://www.econbiz.de/10005011922

How Do Firm Financial Conditions Affect Product Quality and Pricing?

Phillips, Gordon M.; Sertsios, Giorgo - National Bureau of Economic Research (NBER) - 2011

We analyze the interaction of firm product quality and pricing decisions with financial distress and bankruptcy in the airline industry. We consider an airline's choices of quality and price as dynamic decisions that trade off current cash flows for future revenue. We examine how airline...

Persistent link: https://www.econbiz.de/10009223311

Bankruptcy and the Collateral Channel

Benmelech, Efraim; Bergman, Nittai K. - National Bureau of Economic Research (NBER) - 2010

Do bankrupt firms impose negative externalities on their non-bankrupt competitors? We propose and analyze a collateral channel in which a firm's bankruptcy reduces collateral values of other industry participants, thereby increasing the cost of external debt finance industry wide. To identify...

Persistent link: https://www.econbiz.de/10008627161

Testing Theories of Scarcity Pricing in the Airline Industry

Puller, Steven L.; Sengupta, Anirban; Wiggins, Steven N. - National Bureau of Economic Research (NBER) - 2009

This paper investigates why passengers pay substantially different fares for travel on the same airline between the same two airports. We investigate questions that are fundamentally different from those in the existing literature on airline price dispersion. We use a unique new dataset to test...

Persistent link: https://www.econbiz.de/10008631683

Vintage Capital and Creditor Protection

Benmelech, Efraim; Bergman, Nittai K. - National Bureau of Economic Research (NBER) - 2010

We provide novel evidence linking the level of creditor protection provided by law to the degree of usage of technologically older, vintage capital in the airline industry. Using a panel of aircraft-level data around the world, we find that better creditor rights are associated with both...

Persistent link: https://www.econbiz.de/10008634670

Do Airlines in Chapter 11 Harm Their Rivals? Bankruptcy and Pricing Behavior in U.S. Airline Markets

Borenstein, Severin; Rose, Nancy Lin - National Bureau of Economic Research (NBER) - 1995

The behavior of firms in financial distress has attracted considerable academic and policy interest in recent years. The turmoil in the U.S. airline industry has triggered much of the public policy discussion, as some observers have argued that airlines in financial distress, particularly those...

Persistent link: https://www.econbiz.de/10005714697

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