Everybody knows that the prices of such things as airline tickets and hotel rooms are always in flux.
But as Guillaume Yon, a 2022–23 HOPE Center visiting scholar, explains, what many people don’t know is that behind those fluctuating prices are econometric models developed, implemented, and monitored by none other than some of the top economists in the world.
It is the work of those economists that forms the core of Guillaume’s current research project, a project that began with his 2016 dissertation on the economist-engineers who, in the 1950s and 1960s, were heavily involved in managing the new French public electricity service.
“Uber, Amazon, Ticketmaster—they all employ scores of economists who create and test so-called dynamic pricing models, models that tell companies when to raise prices and when to offer discounts, all in an effort, of course, to maximize revenue,” Guillaume says.
And by “scores of economists,” he’s not kidding. As one economist recently told him, the biggest economics department in the world is at Uber, which employs around four hundred economists.
Guillaume, who recently completed a fellowship at the London School of Economics, has been interviewing the economists who develop dynamic pricing models as part of a project to write the history of revenue management, which started with the deregulation of the airline industry in the late 1970s. His subject combines operations research, or the development and application of analytical methods to improve decision-making, and cutting-edge economics.
One thing that has impressed Guillaume about the companies that hire economists is the companies’ belief in the ability of science in general and economics in particular to help them meet their revenue goals.
“The involvement of economists in companies, especially platform companies like Uber, is becoming more and more important,” Guillaume explains. “There is a big movement of economists into the business world, where they work closely with engineers to help companies generate as much revenue as they can.”
In the process, economists are not just helping the Googles of the world meet their bottom line. “They are also producing economic knowledge—a better understanding of just how markets and pricing work and the technical details of estimating demand for products and services.”
In short, Guillaume says, economists are “learning by doing,” working for companies that are run more like marketplaces than traditional businesses.
So far, Guillaume has interviewed over a dozen economists and has been impressed by how “amazingly generous” they have been with their time and insights.
“You need to interview them to really understand the technical details—how the technology was constructed, the mistakes they made, how they corrected those mistakes, and so on.”
Guillaume, whose PhD was in science and technology studies from the École des mines de Paris, first became connected with the history-of-economics community when he was invited to give a paper at the 2018 HES conference in Chicago. That was followed by an invitation to contribute an article on the pricing of electricity in postwar France to the 2020 HOPE conference volume on economics and engineering.
“I arrived at this beautiful place, Duke, and the conference really shaped my focus as a researcher. I’m still drawing on the fruitful comments made by my colleagues there.”
Guillaume is on the job market and is looking forward to the next step in his career.