Brenda A. Barnes
This article first introduces some essential airline pricing and revenue management (PRM) terms and concepts, and then briefly reviews historical events that have shaped the field of airline PRM. It discusses current PRM practices, including strategy, tactics, processes, distribution, and systems, and, finally, highlights trends that will impact the future practice of PRM. The article focuses on the current practices of the major US airlines, which include Delta Air Lines, United-Continental Airlines, American Airlines, and US Airways and account for approximately 75 per cent of US industry revenue; and the practices of the largest low-cost carriers, such as AirTran, JetBlue, and Southwest Airlines.
Ramon P. DeGennaro
This article focuses on a class of angel investors that lies between venture capitalists and the typical informal individual angel investor. It discusses why people become angel investors. It then covers angel investors in groups and discusses group traits and their advantages. The section after that discusses angel investments and the investment process. The article discusses characteristics of a good deal, the financial parameters of an investment, and the angel's exit from the investment. A review of the literature on expected returns on angel investments and the problems with measuring them follows. The final section summarizes.
Andrea Prat and Wouter Dessein
By bringing together multiple workers, organizations can perform tasks that are outside the reach of any individual. In order to be productive, however, workers must coordinate their actions. Often this requires communicating information that is dispersed throughout the organization, but communication is time-consuming and costly. As Arrow (1974) noted, given the importance of communication both as an opportunity and as a cost, organizations will strive to optimize information flows between workers. As a result, communication patterns within an organization will not be random but will be shaped by the goals of the organization. An attention network describes how communication flows and, as a result, how decisions are made within the organization. This chapter reviews optimal and equilibrium attention networks.
This article gives some historical background on auctions and describes the different varieties of auction, such as English, Dutch, Japanese, candle, silent, sealed-bid, Vickery, and simultaneous ascending auctions. It summarizes the most important results from auction theory, including the optimality of the Vickery auction and the revelation principle. The article also describes some of the current topics in auction research, including approaches to combinatorial auctions.
Rodney J. Paul and Andrew P. Weinbach
This article discusses the literature that uses sports gambling markets as an analogy to financial markets. It also expands the study of actual sportsbook behavior, comparing the traditional models to the Levitt hypothesis and considering alternative theories, by examining the betting market for Major League Baseball (MLB). The reverse favorite-longshot bias and home/road biases are then explored. It appears that bettors prefer road favorites by a large margin, but this is not captured by the sportsbook odds, which, likely not coincidentally, tend to map closer to actual favorite win percentages. There are no statistically significant returns to betting against the public. The findings that sportsbooks do not set prices to balance the book calls into question the source of some of the earlier findings of market efficiency in sports wagering markets and its underlying support for the forecasting power of prediction markets.
Özalp Özer and Yanchong Zheng
This article demonstrates how human deviations affect pricing management in both areas of consumer pricing and pricing contracts among firms. It is organized as follows. Section 20.2 discusses some important theories regarding human decision making and social preferences, including the well-known ‘prospect theory’. Section 20.3 focuses on consumer pricing and investigates how different behavioural regularities affect a firm's marketing and pricing decisions. Section 20.4 discusses critical behavioural issues that impact the design and performance of pricing contracts among firms. Section 20.5 summarizes the discussion and concludes by suggesting future research that considers behavioural issues in pricing management.
This chapter considers the analysis of the competitive balance in a formal model that focuses attention on the nature of the market for talent and the nature of the club owner's objective function, and derives the conditions which have led to the dissenting results about the competitive balance. It then addresses the optimal competitive balance in a league theoretically, and whether a win- or profit-maximizing club comes closest to the social optimum. Next, the chapter deals with the invariance proposition, analyzing the effects of restrictions on player mobility and revenue-sharing arrangements. The most unequal competitive balance can be expected in a league in which the large-market clubs are win maximizers and the small-market clubs are profit maximizers. It is noted that the invariance proposition no longer holds if one of the teams in a league is a win maximizer.
Aju J. Fenn
This chapter outlines the relevant economic literature pertaining to the birth and evolution of football as a sport in the United States, and also reviews the game from its birth until the formation of the National Football League (NFL). Next, it briefly deals with some of the themes regarding football that have been explored in the rest of the literature. The classification of the literature on the NFL includes: the creation of NFL institutions that have led to increased competitive balance; the impact of race on players' and coaches' success in the NFL; betting on NFL games; issues of market power and profitability; and the cost-benefit analysis of hosting an NFL team. The United Football League has quietly entered markets where the NFL does not have a presence. It started play in 2007 and may gain market share if the NFL locks its players out for the 2011–2012 season.
Brad R. Humphreys and Nicholas M. Watanabe
This chapter describes the uncertainty-of-outcome hypothesis and the seminal research of Simon Rottenberg, and then elaborates on the way that competitive balance is measured. Next, the exchange between Zimbalist and Fort and Maxcy about the nature of research on competitive balance and the effect of this exchange on subsequent literature are explored. Finally, the chapter surveys the research on competitive balance in promotion-and-relegation leagues, a common league arrangement outside of North America. Rottenberg's influence on sports economics is as great as that of any other economist to date, and knowledge of this seminal work is essential to understanding research in sports economics. Each of the many measures of competitive balance has relative strengths and weaknesses, and each captures a different element of competitive balance. It is difficult to determine whether one league has better competitive balance than another, because of the sensitivity of many competitive-balance measures to league composition and structure.
This paper explores the uses of the field of competitive strategy in the nonprofit sector. It begins with a discussion of the central differences between nonprofit and for profit organizations. Most fundamentally, nonprofits emphasize mission fulfillment rather than strict profit maximization. Nonprofits are also distinguished from for-profits by their reliance on donations as well as earned income. Both the difference in objective function and the use of multiple revenue sources affect the dynamic strategies of nonprofits. This paper explores exit and entry patterns we expect to see in the nonprofit sector, pricing strategies, levels of differentiation, and the usual sources of competitive advantage in the sector. It also illustrates the ways in which the classic tools from strategy like Hotelling and the Bresnahan-Reiss entry models are informative in the nonprofit sector.