We investigate the impact of strategic consumer behavior on retailers' dynamic pricing decisions. We present a stylized two-period model, and test the equilibrium predictions in a set of behavioral experiments in which human subjects played the role of pricing managers. Our main insight is that...

It seems rather intuitive that customers who pay higher prices for otherwise identical products/services should be more valuable to the firm. However, we show that in dynamic pricing situations with limited capacity (airlines, hotels, advertisers, sports/concert venues, etc.) this intuition...