Strategic implementation of 'everyday low price' in electronic markets: a study of airline pricing on the internet

Working papers seriesAn Everyday Low Price (EDLP) strategy is a product-portfolio level pricing strategy by which a firm attempts to convey to consumers that prices across its product portfolio are consistently low. Empirically, the EDLP strategy is operationalized along two dimensions; the “everyday” component, which relates to the consistency in product prices over time, and the “low price” component, which implies that the prices set are on average lower than other prices available in the market. There may, however, be specific categories or markets in which even EDLP firms may prefer to eschew their consistency and low price goals. The U.S. domestic airline industry has two airlines that adopt the EDLP format while most others employ a promotional (HILO) pricing strategy, thus providing a rich context to investigate how the EDLP price-image strategy is implemented. We use a web crawler to gather information on over 270,000 ticket prices offered by the major airlines in 472 markets, and use a hierarchical linear model to analyze how these two dimensions of price vary with ticket categories and market conditions – defined in economics literature by advance purchase periods, weekend restrictions, airlines’ competitiveness, market distance, and hub operations. We find that the EDLP airlines emphasize the everyday dimension of their pricing much more than the low price dimension. Thus while their prices are systematically more consistent than their HILO competitors, their price levels show that they practice the same form of price discrimination with advance-purchase periods as their HILO competitors. Interestingly, while most airlines charge higher prices for tickets without weekend restriction, which are typically targeted towards business travelers, EDLP firms charge lower prices for these tickets. Further investigation at a category level reveals that these lower business fares are distinct features of short-haul markets where EDLP firms are known to enjoy certain cost advantages due to smaller equipment sizes of their flights. From the “everyday” point of view, we see that while there are no differences in the consistency of prices of EDLP tickets based on advance purchase periods, prices of business-focused EDLP tickets are distinctly more consistent than those of leisure-oriented tickets. Curiously, even in markets where EDLP firms are monopolists, they do not appear to be exercising their monopoly power; on the other hand, HILO firms distinctly employ discriminatory pricing in their monopoly markets. Perhaps this is a reflection of EDLP firms pursuing a limit-pricing/barrier-to-entry strategy. Our research shows that the practice of EDLP in online markets involves strategic variations in how price image is communicated.preprin

Price formats as a source of price dispersion: A Study of online and ofline pices in the dmestic U.S. arline markets

Alarge body of research in economics, information systems, and marketing has sought to understand sources of price dispersion. Previous empirical work has mainly offered consumer- and/or product-based explanations for this phenomenon. In contrast, our research explores the key role played by vendors' price-format adoption in explaining price dispersion. We empirically analyze over a half-million online and offline prices offered by major U.S. airlines in the top 500 domestic markets. Our study shows that a vendor's price format remains an important source of price dispersion in both channels even after accounting for other factors known to impact dispersion in airline ticket prices. Importantly, this finding is true for both transacted and posted tickets. We document several other interesting empirical findings. First, the lower variance in the prices of "everyday low price" (EDLP) firms serves to reduce the market-level dispersion in prices when such firms are present. Moreover, the price variance of non-EDLP firms in these markets is also lower than in those markets in which EDLP competitors are absent. Second, we also find that dispersion in offered prices increases closer to the departure date, which is consistent with theoretical assertion that price dispersion increases with reservation prices. Finally, we continue to observe dispersion of online prices even after accounting for vendor strategy and other known sources of dispersion, suggesting that the prices are unlikely to converge even in the presence of sophisticated online search mechanisms.preprin

Solution spraying of poly(methyl methacrylate) blends to fabricate microtextured, superoleophobic surfaces

We describe a simple technique to prepare superhydrophobic and superoleophobic microtextured surfaces by spray coating a blend of poly(methyl methacrylate) (PMMA) and the low surface energy molecule 1H,1H,2H,2H-heptadecafluorodecyl polyhedral oligomeric silsesquioxane (fluorodecyl POSS, γ[subscript sv] ≈ 10 mN/m) using an air brush with a pressurized nitrogen stream. Scanning electron micrographs show the formation of microtextured surfaces possessing re-entrant curvature; a critical feature for obtaining liquid repellency with low surface tension liquids. The surface morphology can be tuned systematically from a corpuscular or spherical microstructure to a beads-on-string structure and finally to bundled fibers by controlling the solution concentration and molecular weight of the sprayed polymer. The oleophobicity of the resulting structures is characterized by advancing and receding contact angle measurements with liquids of a range of surface tensions.United States. Army Research Office (Contract W911NF-07-D-0004)Air Force Research Laboratory (Wright-Patterson Air Force Base, Ohio). Propulsion DirectorateUnited States. Air Force Office of Scientific Researc

Does Reporting Heterogeneity Bias The Measurement of Health Disparities?

Heterogeneity in reporting of health by socio-economic and demographic characteristics potentially biases the measurement of health disparities. We use anchoring vignettes to identify reporting heterogeneity in self reports on health for Indonesia, India and China. Correcting for reporting heterogeneity tends to reduce estimated disparities in health by age, sex (not Indonesia), urban/rural and education (not China) and to increase income disparities in health. Overall, while homogeneous reporting by socio-demographic group is significantly rejected, the results suggest that the size of the reporting bias in measures of health disparities is not large

Does reporting heterogeneity bias the measurement of health disparities?

Heterogeneity in reporting of health by socio-economic and demographic characteristics potentially biases the measurement of health disparities. We use anchoring vignettes to identify reporting heterogeneity in self reports on health for Indonesia, India and China. Correcting for reporting heterogeneity tends to reduce estimated disparities in health by age, sex (not Indonesia), urban/rural and education (not China) and to increase income disparities in health. Overall, while homogeneous reporting by socio-demographic group is significantly rejected, the results suggest that the size of the reporting bias in measures of health disparities is not large

Bayesian angular power spectrum analysis of interferometric data

We present a Bayesian angular power spectrum and signal map inference engine which can be adapted to interferometric observations of anisotropies inthe cosmic microwave background, 21 cm emission line mapping of galactic brightness fluctuations, or 21 cm absorption line mapping of neutral hydrogen in the dark ages. The method uses Gibbs sampling to generate a sampled representation of the angular power spectrum posterior and the posterior of signal maps given a set of measured visibilities in the uv-plane. We use a mock interferometric CMB observation to demonstrate the validity of this method in the flat-sky approximation when adapted to take into account arbitrary coverage of the uv-plane, mode-mode correlations due to observations on a finite patch, and heteroschedastic visibility errors. The computational requirements scale as O(n_p log n_p) where n_p measures the ratio of the size of the detector array to the inter-detector spacing, meaning that Gibbs sampling is a promising technique for meeting the data analysis requirements of future cosmology missions.Comment: 7 pages, 10 figures, expanded discussion and edited to match ApJS approved version, affiliations update