Intertemporal Price Discrimination: Dynamic Arrivals and Changing Values
American Economic Review · 2016 · Volume 106 · Issue 11
Abstract
We study the profit-maximizing price path of a monopolist selling a durable good to buyers who arrive over time and whose values for the good evolve stochastically. The setting is completely stationary with an infinite horizon. Contrary to the case with constant values, optimal prices fluctuate with time. We argue that consumers' randomly changing values offer an explanation for temporary price reductions that are often observed in practice.
Keywords
Market Structure, Pricing, and Design: Monopoly, Asymmetric and Private Information, Mechanism Design, Monopoly, Monopolization Strategies, Retail and Wholesale Trade, e-Commerce
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