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Sellers of perishable goods increasingly use dynamic pricing strategies as technology makes it easier to change prices and track inventory. This paper tests how accurately theoretical models of dynamic pricing describe sellers’ behavior in secondary markets for event tickets, a classic example of a perishable good. It shows that the simplest dynamic pricing models describe very accurately both the pricing problem faced by sellers and how they behave, explaining why sellers cut prices dramatically, by 40 percent or more, as an event approaches. The estimates also imply that dynamic pricing is valuable, raising the average seller’s expected payoff by around 16 percent.
Andrew Sweeting (Sat,) studied this question.