Sensitivity of prices to demand shocks: a natural experiment in the San Francisco Bay area

Volodymyr Bilotkach; Yuriy Gorodnichenko; Oleksandr Talavera

doi:10.1016/j.tra.2012.02.018

Sensitivity of prices to demand shocks: a natural experiment in the San Francisco Bay area

Volodymyr Bilotkach, Yuriy Gorodnichenko, Oleksandr Talavera

Northumbria University

Research output: Contribution to journal › Article › peer-review

9 Citations (Scopus)

Abstract

We analyze the impact of a freeway interchange collapse in the San Francisco Bay Area on the difference in airfare quotes for travel into the area’s main airports. The incident temporarily made Oakland airport a less attractive choice for traveling to San Francisco, so we hypothesize that fares for travel into Oakland will be relatively lower while the freeway interchange was out of service. We test our contention using a sample of fare quotes collected on-line, and find the expected effect of a magnitude of 6–7%. Our results imply the following important conclusions. First, the demand-side shock was well absorbed by the supply side. Second, adjustment of prices and return to the status quo once the shock vanished was swift.

Original language	English
Pages (from-to)	1137-1151
Journal	Transportation Research Part A: Policy and Practice
Volume	46
Issue number	7
DOIs	https://doi.org/10.1016/j.tra.2012.02.018
Publication status	Published - Mar 2012

Keywords

Natural experiment
demand shocks
congestion
price stability

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10.1016/j.tra.2012.02.018

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title = "Sensitivity of prices to demand shocks: a natural experiment in the San Francisco Bay area",

abstract = "We analyze the impact of a freeway interchange collapse in the San Francisco Bay Area on the difference in airfare quotes for travel into the area{\textquoteright}s main airports. The incident temporarily made Oakland airport a less attractive choice for traveling to San Francisco, so we hypothesize that fares for travel into Oakland will be relatively lower while the freeway interchange was out of service. We test our contention using a sample of fare quotes collected on-line, and find the expected effect of a magnitude of 6–7%. Our results imply the following important conclusions. First, the demand-side shock was well absorbed by the supply side. Second, adjustment of prices and return to the status quo once the shock vanished was swift.",

keywords = "Natural experiment, demand shocks, congestion, price stability",

author = "Volodymyr Bilotkach and Yuriy Gorodnichenko and Oleksandr Talavera",

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AU - Bilotkach, Volodymyr

AU - Gorodnichenko, Yuriy

AU - Talavera, Oleksandr

PY - 2012/3

Y1 - 2012/3

N2 - We analyze the impact of a freeway interchange collapse in the San Francisco Bay Area on the difference in airfare quotes for travel into the area’s main airports. The incident temporarily made Oakland airport a less attractive choice for traveling to San Francisco, so we hypothesize that fares for travel into Oakland will be relatively lower while the freeway interchange was out of service. We test our contention using a sample of fare quotes collected on-line, and find the expected effect of a magnitude of 6–7%. Our results imply the following important conclusions. First, the demand-side shock was well absorbed by the supply side. Second, adjustment of prices and return to the status quo once the shock vanished was swift.

AB - We analyze the impact of a freeway interchange collapse in the San Francisco Bay Area on the difference in airfare quotes for travel into the area’s main airports. The incident temporarily made Oakland airport a less attractive choice for traveling to San Francisco, so we hypothesize that fares for travel into Oakland will be relatively lower while the freeway interchange was out of service. We test our contention using a sample of fare quotes collected on-line, and find the expected effect of a magnitude of 6–7%. Our results imply the following important conclusions. First, the demand-side shock was well absorbed by the supply side. Second, adjustment of prices and return to the status quo once the shock vanished was swift.

KW - Natural experiment

KW - demand shocks

KW - congestion

KW - price stability

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DO - 10.1016/j.tra.2012.02.018

M3 - Article

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JO - Transportation Research Part A: Policy and Practice

JF - Transportation Research Part A: Policy and Practice

IS - 7

ER -

Sensitivity of prices to demand shocks: a natural experiment in the San Francisco Bay area

Abstract

Keywords

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