A Test of Monopoly Price Dispersion Under Demand Uncertainty

Posted by D. Daniel Sokol

Brad Humphreys (University of Alberta, Department of Economics) and Brian Soebbing (University of Alberta, Physical Education and Recreation offer A Test of Monopoly Price Dispersion Under Demand Uncertainty.

ABSTRACT: Dana (2001) developed a model of price dispersion under demand uncertainty. The model predicts that, in the face of uncertain demand and inflexible prices, monopolists maximizes pro fits using ex ante price discrimination. We test the predictions of this model using a unique data set from Major League Baseball (MLB). Estimation of a two-way fixed effects model indicate that ticket price dispersion changes systematically with demand uncertainty in MLB, verifying the predictions of the model.