Research / BFI Working PaperNov 23, 2021

Organizational Structure and Pricing: Evidence from a Large U.S. Airline

Ali Hortaçsu, Olivia R. Natan, Hayden Parsley, Timothy Schwieg, Kevin R. Williams

We study how organizational boundaries affect pricing decisions using comprehensive data from a large U.S. airline. We document that the firm’s advanced pricing algorithm, utilizing inputs from different organizational teams, is subject to multiple biases. To quantify the impacts of these biases, we estimate a structural demand model using sales and search data. We recover the demand curves the firm believes it faces using forecasting data. In counterfactuals, we show that correcting biases introduced by organizational teams individually have little impact on market outcomes, but coordinating organizational outcomes leads to higher prices/revenues and increased dead-weight loss in the markets studied.

More Research From These Scholars

BFI Working Paper Apr 25, 2020

Estimating the Fraction of Unreported Infections in Epidemics with a Known Epicenter: An Application to COVID-19

Ali Hortaçsu, Jiarui Liu, Timothy Schwieg
Topics:  COVID-19
BFI Working Paper Apr 18, 2019

The Production, Relocation, and Price Effects of US Trade Policy: The Case of Washing Machines

Aaron Flaaen, Ali Hortaçsu, Felix Tintelnot
Topics:  Industrial Organization, Tax & Budget
BFI Working Paper Oct 21, 2019

Design and Analysis of Cluster-Randomized Field Experiments in Panel Data Settings

Bharat K. Chandar, Ali Hortaçsu, John List, Ian Muir, Jeffrey M. Wooldridge
Topics:  Employment & Wages