Sensitivity of prices to demand shocks: A natural experiment in the San Francisco Bay Area

  1. Lookup NU author(s)
  2. Dr Volodymyr Bilotkach
Author(s)Bilotkach V, Gorodnichenko Y, Talavera O
Publication type Article
JournalTransportation Research A: Policy and Practice
Year2012
Volume46
Issue7
Pages1137-1151
ISSN (print)0965-8564
ISSN (electronic)1879-2375
Full text for this publication is not currently held within this repository. Alternative links are provided below where available.
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.
PublisherPergamon
URLhttp://dx.doi.org/10.1016/j.tra.2012.02.018
DOI10.1016/j.tra.2012.02.018
Actions    Link to this publication