Intertemporal Price Discrimination in Storable Goods Markets
American Economic Review · 2013 · Volume 103 · Issue 7
Abstract
We study intertemporal price discrimination when consumers can store for future consumption needs. We offer a simple model of demand dynamics, which we estimate using market-level data. Optimal pricing involves temporary price reductions that enable sellers to discriminate between price sensitive consumers, who stockpile for future consumption, and less price-sensitive consumers, who do not stockpile. We empirically quantify the impact of intertemporal price discrimination on profits and welfare. We find that sales (i) capture 25-30 percent of the gap between non-discriminatory profits and (unattainable) third-degree price discrimination profits, (ii) increase total welfare, and (iii) have a modest impact on consumer welfare.
Keywords
Consumer Economics: Theory, Consumer Economics: Empirical Analysis, Production, Pricing, and Market Structure, Size Distribution of Firms, Monopoly, Monopolization Strategies, Retail and Wholesale Trade, e-Commerce
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