Claudio A Piga
Università degli Studi di Genova, Dipartimento di economia, Faculty Member
- Keele University, Keele Management School, Faculty MemberRimini Centre for Economics Analysis, Senior Research Fellow, Faculty Memberadd
- Economist interested in pricingedit
We present a three-stage game where two firms choose location, R&D and price, under the assumption that R&D spillovers depend on firms' location. That is, the closer firms are to each other, the greater the benefit they... more
We present a three-stage game where two firms choose location, R&D and price, under the assumption that R&D spillovers depend on firms' location. That is, the closer firms are to each other, the greater the benefit they receive from their rivals' efforts in quality-enhancing R&D. We show that the distance between firms' location increases with the degree of product differentiation. Further, we find that minimal quality differentiation always occurs. Finally, investment in R&D is positively associated with the degree of product differentiation.
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Cooperation in innovation activities is a key building block in forming entrepreneurial innovation networks. However, the impact on innovation of different forms of cooperation among multiple stakeholders composing a firm’s relational... more
Cooperation in innovation activities is a key building block in forming entrepreneurial innovation networks. However, the impact on innovation of different forms of cooperation among multiple stakeholders composing a firm’s relational environment can be dramatically different, depending on whether the modalities of cooperation are tacit or explicit and the type of functional relations between the cooperating organizations. Information and Communication Technologies (ICTs) facilitate cooperation and innovation outcomes. The main aim of this paper is to disentangle the effects of explicit vs. tacit and complementarity vs. competitive modalities of cooperation in innovation activities on innovation outputs. Based on pooled UK Microdata from 2004 to 2010, this paper’s main finding is that tacit cooperation, emerging from R&D and ICTs spillovers, increases firms’ likelihood to introduce process, product, and organizational innovations. We also find that a firm’s functional relation with ...
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In this paper, we study whether competition in the airport market and the vertical interactions between upstream airports and downstream airlines influence the airport pricing decisions. Using a panel of the 24 largest UK airports, as... more
In this paper, we study whether competition in the airport market and the vertical interactions between upstream airports and downstream airlines influence the airport pricing decisions. Using a panel of the 24 largest UK airports, as well as a refined definition of airports’ market structure, we find that lower concentration in an airport’s catchment area and higher airlines countervailing power are associated to lower aeronautical charges.
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Using novel data on the pricing for hotel rooms in Paris during the summer of the 2016 European Football Cup, we document the co-existence of uniform and bespoke pricing within the same industry and even within the same firm. Although... more
Using novel data on the pricing for hotel rooms in Paris during the summer of the 2016 European Football Cup, we document the co-existence of uniform and bespoke pricing within the same industry and even within the same firm. Although stay dates have heterogenous potential demand, hotels initially price them uniformly. However, as time goes by, they progressively set customized prices. We show that standard revenue management techniques can explain the shift and find evidence that the inability to form expectations about future demand was a determinant of the initial choice of uniform prices. Finally, we find that firm characteristics have a role in shaping the transition.
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An often disregarded, albeit central, aspect of the airline pricing's problem consists in assigning a fare to all the available seats on an airplane at the beginning of and during the whole booking period. We show how a flight's... more
An often disregarded, albeit central, aspect of the airline pricing's problem consists in assigning a fare to all the available seats on an airplane at the beginning of and during the whole booking period. We show how a flight's fare distribution is set in practice and how it changes over time using evidence from a leading European low-cost carrier. Such pricing behavior is consistent with the main predictions from the theoretical model we present. First, fare distributions are increasing across seats because a lower fare for the seat on sale enhances the likelihood of selling the subsequent seats. Second, over time fare distributions move, on average, downward to reflect the perishable nature of a flight's seats. Third, due to the increasing profile of the fare distributions across seats, we find that the price observed by prospective buyers tends to increase as the date of departure nears.
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Mergers and business model assimilation: evidence from low-cost airline takeovers This item was submitted to Loughborough University's Institutional Repository by the/an author. Additional Information: • This is a working paper. It... more
Mergers and business model assimilation: evidence from low-cost airline takeovers This item was submitted to Loughborough University's Institutional Repository by the/an author. Additional Information: • This is a working paper. It is also available at:
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The authors analyse the entry and exit activity in the UK–Europe airline markets and study the differential traits of three main airlines (British Airways, EasyJet and RyanAir) during1997–2004. They find that entry and exit are more... more
The authors analyse the entry and exit activity in the UK–Europe airline markets and study the differential traits of three main airlines (British Airways, EasyJet and RyanAir) during1997–2004. They find that entry and exit are more likely in large markets and in markets with a high number of incumbents. Already operating in the city-pair enhances the probability that the same firm will enter another route in the same city-pair. The existence of charter flights generates both entries and exits, while high seasonality generally discourages entry. Also, the level of service quality provided by the incumbents matters.
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Abstract: We study a vertical relationship between two firms, and we show that the extent of the downstream firm's borrowing affects the contract offered by the upstream firm. We establish a negative relationship between the level of... more
Abstract: We study a vertical relationship between two firms, and we show that the extent of the downstream firm's borrowing affects the contract offered by the upstream firm. We establish a negative relationship between the level of debt and the downstream firm's probability of ...
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This study addresses two issues relating to the pricing beha-viour of European airlines: 1) whether an airline’s dominant posi-tion at the origin airport, at the route and the city-pair level affects the airlines ’ market power; 2)... more
This study addresses two issues relating to the pricing beha-viour of European airlines: 1) whether an airline’s dominant posi-tion at the origin airport, at the route and the city-pair level affects the airlines ’ market power; 2) whether fares follow a monotonic ti-me path consistent with the pursuing of an inter-temporal price di-scrimination strategy. Our estimates reveal that enjoying a domi-nant position within a route is conducive to higher fares. On the contrary, dominance within a city-pair does not seem to facilitate the exercise of market power. We find robust support to the as-sumption that fares follow a monotonic time path. [JEL Classifi-cation: L11, L13, L93] Questo studio affronta due aspetti riguardanti le strategie di prezzo delle compagnie aeree europee: 1) se la posizione dominan-te di una compagnia su l’aeroporto d’origine, sulla rotta e sul mer-cato influenza il potere di mercato delle compagnie stesse; 2) se le tariffe seguano un profilo temporale monotonico i...
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Using unique data on a low-cost airline posted prices and seat availability, this study sheds some light on whether the airline's actual practice of yield management techniques con- forms with some predictions from economic models of... more
Using unique data on a low-cost airline posted prices and seat availability, this study sheds some light on whether the airline's actual practice of yield management techniques con- forms with some predictions from economic models of peak-load pricing under demand uncertainty. On the one hand, robust support is found to the notion that prices increase as the seat availability decreases; on the other, theoretical models that do not account for stochastic peak-load pricing fail to capture an important source of dispersion in the data.
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Purpose Focusing on two beer festivals held in Nottingham, England, this study aims to evaluate their indirect impact on the performance of city hotels. This study builds on theoretical insights from the revenue management literature to... more
Purpose Focusing on two beer festivals held in Nottingham, England, this study aims to evaluate their indirect impact on the performance of city hotels. This study builds on theoretical insights from the revenue management literature to shed empirical light on the potentially beneficial effects of events on the hotels’ performance. This study investigates the impact of the differential support offered by the destination management organisation (DMO) over two years. Design/methodology/approach Using online prices posted in advance of the events on an online travel agent, the authors assess hotel performance for each day of the events relative to the same day of the week in a week with no event. A similar comparison is made to assess the impact across two different years. In both cases, an ordinary least squares methodology was used. Findings Both events appear not to have had a strong impact on hotel prices and occupancy in 2016, i.e. when the DMO’s promotional effort was more proact...
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We study the relationship between pricing and market structure on the routes connecting the UK and the Republic of Ireland. Because in 2007 the European Commission prohibited the takeover of Aer Lingus by Ryanair, the analysis focuses on... more
We study the relationship between pricing and market structure on the routes connecting the UK and the Republic of Ireland. Because in 2007 the European Commission prohibited the takeover of Aer Lingus by Ryanair, the analysis focuses on their pricing strategies in particular. We use an original dataset of fares posted on-line, which allows to control for the fares’ intertemporal pattern for each specific flight and each carrier’s specific yield management system. Our evidence supports the European Commission’s view that the elimination of a competitor in the Irish airline market is likely to have harmful consequences for consumers.
Using more than 10 million on-line fares, we study the determinants of yearly fares changes in June 2002-June 2005. We verify whether airlines took advantage, after the Euro introduction, of potential inationary pressures by increasing... more
Using more than 10 million on-line fares, we study the determinants of yearly fares changes in June 2002-June 2005. We verify whether airlines took advantage, after the Euro introduction, of potential inationary pressures by increasing their fares more in routes to Eurozone nations. All else equal, fares in such routes declined, although their reduction was smaller than in the case of routes outside the Euro area. The evidence also points at the possibility that the changeover may have enhanced the airlinesability to engage in inter-temporal price discrimination. Keywords: Price discrimination; airlines; Euro, changeover. JEL classi
cation: L11, L13, L93 Piga gratefully acknowledges receipt of the British Academy Larger Research Grant LRG-35378. Previous versions were presented at the 2005 EARIE conference in Porto, at the 2006 International Industrial Organization Society in Boston and at the 2006 Royal Economic Society Conference in Nottingham, as well at various seminars. The ...
This paper presents a new form of on-line pricing t actic where airlines post, at the same time and for the same flight, fares in different cu rrencies that violate the law of One Price. Unexpectedly for an on-line market, price discrimin... more
This paper presents a new form of on-line pricing t actic where airlines post, at the same time and for the same flight, fares in different cu rrencies that violate the law of One Price. Unexpectedly for an on-line market, price discrimin at on may be accompanied by arbitrage opportunities that tend to persist in the period pr eceding a flight’s departure. The evidence suggests that discrimination may be used to manage stochasti c demand. JEL classification: L11, L13, L93
We introduce an on-line pricing tactic where airlin es post, at the same time and for the same flight, fares in different currencies that vio late the law of One Price. Unexpectedly for an on-line market, we find that price discriminatio... more
We introduce an on-line pricing tactic where airlin es post, at the same time and for the same flight, fares in different currencies that vio late the law of One Price. Unexpectedly for an on-line market, we find that price discriminatio n may be accompanied by arbitrage opportunities and that both tend to persist before a flight’s departure. We find discrimination to be of a competitive type, although arbitrage opp ortunities are more likely in concentrated routes. Finally, the evidence suggests that discrim ination may be used to manage stochastic demand. JEL classification: L11, L13, L93
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We study the main features of a pricing algorithm in the presence of organizational frictions, which impede continuous price adjustments. If prices cannot be continuously and instantaneously updated, and advance sale of fixed capacity is... more
We study the main features of a pricing algorithm in the presence of organizational frictions, which impede continuous price adjustments. If prices cannot be continuously and instantaneously updated, and advance sale of fixed capacity is possible, the pricing algorithm optimally assigns a price to each unit in a (non-strictly) monotonically increasing sequence based on the order of sale; prices remain “static” until the algorithm induces dynamic pricing by modifying the sequence. Data from a large European carrier support the assumption that airlines do not adjust fares constantly, as static spells last 35 hours on average but may be longer depending on a flight’s load factor, its selling rate and the time to departure. Dynamic pricing may occur in two forms, with seats being either marked-down or marked-up. The latter tends to occur predominantly during the day, suggesting that human decision-making often complements the algorithm’s operativity. JEL Classification: D22, L11, L93.
Unlike its planes, easyJet prices go up but don't come down: The longer you wait, the more you pay, write Marco Alderighi, Alberto A. Gaggero and Claudio A. Piga
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This paper examines mergers that lead to an almost immediate replacement of the target firm’s business model in favour of that of the acquiring firm. We examine the post-merger behaviour of the two leading European dedicated low-cost... more
This paper examines mergers that lead to an almost immediate replacement of the target firm’s business model in favour of that of the acquiring firm. We examine the post-merger behaviour of the two leading European dedicated low-cost airlines, EasyJet and Ryanair, each acquiring another low-cost airline, respectively Go Fly and Buzz. We find that both takeovers had an immediate and sustained impact on both the pricing structures and the extent of inter-temporal price discrimination used on the acquired routes, with early booking fares noticeably reduced and only very late booking fares increased. Overall, the analysis points to a pro-competitive effect of both takeovers as a consequence of the introduction of the acquiring firms’ business models and associated yield management pricing systems.
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The paper analyzes the circular model of localized competition by allowing …rms to have heterogeneous costs. We provide a closed-form solution for the equilibrium prices evoking Chamberlin's "domino eect", and we discuss... more
The paper analyzes the circular model of localized competition by allowing …rms to have heterogeneous costs. We provide a closed-form solution for the equilibrium prices evoking Chamberlin's "domino eect", and we discuss some economic implications and the empirical relevance. We also show that in a simple set-up accounting for vertically related industries when down-stream markets are chain-linked, market power of manufacturers is strongly aected by the arrangement of retailers. We …nally present some competition policy implications. JEL classi…cation: L11, D61.
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Using evidence from an original dataset of more than 12 million fares, this study sheds light on two issues relating to the pricing behaviour of the main European airlines: 1) the extent to which an airline’s dominant position at the... more
Using evidence from an original dataset of more than 12 million fares, this study sheds light on two issues relating to the pricing behaviour of the main European airlines: 1) the extent to which an airline’s dominant position at the origin airport, at the route and the city-pair level affects the airlines’ market power; 2) whether fares follow a monotonic time path consistent with the pursuing of an inter-temporal price discrimination strategy. Our estimates reveal that enjoying a dominant position within a route is conducive to higher fares, possibly because of the limited size of many “natural monopoly” routes that facilitate the incumbent’s engagement in a limit pricing strategy. On the contrary, a larger share within a city-pair does not seem to facilitate the exercise of market power, thereby suggesting the existence of a large degree of substitutability between the routes in a city-pair.
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Online platforms often impose Price Parity Clauses to prevent sellers from charging lower prices on alternative sales channels. We provide quasi-experimental evidence on the full removal of Price Parity Clauses in France in 2015 and in... more
Online platforms often impose Price Parity Clauses to prevent sellers from charging lower prices on alternative sales channels. We provide quasi-experimental evidence on the full removal of Price Parity Clauses in France in 2015 and in Italy in 2017 for hotels listed on Booking.com. Our analysis reveals a relatively limited effect in the short run followed by a significant reduction in room prices in the medium run. Moreover, we find that hotels affiliated with chains decreased their prices more than independent hotels, both in the short and medium run. Overall, the policy interventions led to substantive savings for consumers. JEL: D40, K21, L11, L42, L81.
This paper analyzes the empirical relationship between market structure and price dispersion in the airline markets connecting the UK and the Republic of Ireland. Price dispersion is measured by a number of inequality indexes, calculated... more
This paper analyzes the empirical relationship between market structure and price dispersion in the airline markets connecting the UK and the Republic of Ireland. Price dispersion is measured by a number of inequality indexes, calculated using fares posted on the Internet at specific days before takeoff. We find a negative correlation between market dominance and price dispersion; thus competition appears to hinder the airlines’ ability to price discriminate to exploit consumers’ heterogeneity in booking time preferences. Moreover, in the Christmas and Easter periods of high demand, fares are less dispersed, possibly because airlines target a less heterogenous set of consumers. JEL Classification: D43, L10, L93.
This paper analyzes the strategic opportunities enabled by one of Booking.com's managerial innovations introduced in 2015-16: a new online discount feature. Focusing on the hospitality and online booking platforms, we explore the role... more
This paper analyzes the strategic opportunities enabled by one of Booking.com's managerial innovations introduced in 2015-16: a new online discount feature. Focusing on the hospitality and online booking platforms, we explore the role of the heterogeneity in characteristics that make establishments more susceptible to embrace such innovation. The empirical analysis indicates that the propensity to adopt a managerial innovation is positively affected by ratings and user perception, as well as online sales experience and chain affiliation. Conversely, we find that the type of establishment does not significantly affect the propensity to adopt the innovative discount feature.
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This item was submitted to Loughborough's Institutional Repository (https://dspace.lboro.ac.uk /) by the author and is made available under the following Creative Commons Licence conditions. ... For the full text of this licence,... more
This item was submitted to Loughborough's Institutional Repository (https://dspace.lboro.ac.uk /) by the author and is made available under the following Creative Commons Licence conditions. ... For the full text of this licence, please go to: http://creativecommons.org/ ...