Are Consumers Strategic? Structural Estimation from the Air-Travel Industry

@article{Li2014AreCS,
  title={Are Consumers Strategic? Structural Estimation from the Air-Travel Industry},
  author={Jun Li and Nelson F. Granados and Serguei Netessine},
  journal={Management Science},
  year={2014},
  volume={60},
  pages={2114-2137}
}
Consumers often consider delaying a purchase strategically, anticipating that prices might decrease. Combining two unique data sources from the air-travel industry (posted fare data and booking data), we use a structural model to estimate the fraction of strategic consumers in the population, assuming different levels of sophistication in consumers' perception of future prices: perfect foresight and weakand strong-form rational expectations. We find that 5.2% to 19.2% of the population is… CONTINUE READING
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