Keele Business School, Keele University, UK
Linking Algorithms to Static and Dynamic pricing: theory and evidence
Piga, Alderighi and Gaggero
We show how the main features of a pricing algorithm are shaped by organizational frictions, which impede continuous price adjustments. In our theoretical multi-unit capacity, multi-period pricing model, frictions lead the algorithm to set prices for each unit, which remain constant during a `static pricing spell’; dynamic pricing occurs when the algorithm modifies at least one price. Using airline data, we find evidence of static spells lasting long enough to suggest carriers cannot adjust fares constantly, consistent with the model’s assumptions and predictions.
Claudio Piga is Professor of Economics at the Business School of the Keele University. Previously he held positions at the universities of Loughborough, Nottingham and Hull. He has also been Visiting Professor at the Texas A&M University, the University of Rome – Luiss, and the University of Cagliari. His research interests cover a number of areas in applied microeconomics: pricing, with a particular focus on the airline and the travel and tourism industry; oligopoly theory with an emphasis on models of localised competition; innovation and total factor productivity. He has also managed many research projects funded by such British research organizations as the Leverhulme Trust and the British Academy and has recently received a grant from the UK Office of National Statistics to study the dynamics of house prices in the UK. Claudio’s research output was published in such journals as the Review of Economics and Statistics, the Journal of Industrial Economics, the International Journal of Industrial Organization, the Journal of Economics and Management Strategy, the Journal of Productivity Analysis, Industrial and Corporate Change and Regional Science and Urban Economics, among others.