Organizational Structure and Pricing: Evidence from a Large US Airline

• 成果类型: Article
• 署名作者: Hortacsu, Ali; Natan, Olivia R.; Parsley, Hayden; Schwieg, Timothy; Williams, Kevin R.
• 署名单位: University of Chicago; National Bureau of Economic Research; University of California System; University of California Berkeley; University of Texas System; University of Texas Austin; Yale University
• 刊物名称: QUARTERLY JOURNAL OF ECONOMICS
• ISSN/ISSBN: 0033-5533
• DOI: 10.1093/qje/qjad051
• 发表日期: 2024
• 页码: 1149-1199
• 关键词: models; management; demand; entry; equilibrium; CHOICE; fit

摘要

Firms facing complex objectives often decompose the problems they face, delegating different parts of the decision to distinct subunits. Using comprehensive data and internal models from a large U.S. airline, we establish that airline pricing is not well approximated by a model of the firm as a unitary decision maker. We show that observed prices, however, can be rationalized by accounting for organizational structure and for the decisions by departments that are tasked with supplying inputs to the observed pricing heuristic. Simulating the prices the firm would charge if it were a rational, unitary decision maker results in lower welfare than we estimate under observed practices. Finally, we discuss why counterfactual estimates of welfare and market power may be biased if prices are set through decomposition, but we instead assume that they are set by unitary decision makers.