Intertemporal Price Discrimination in Storable Goods Markets
AbstractWe 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.
CitationHendel, Igal, and Aviv Nevo. 2013. "Intertemporal Price Discrimination in Storable Goods Markets." American Economic Review, 103 (7): 2722-51. DOI: 10.1257/aer.103.7.2722
- D11 Consumer Economics: Theory
- D12 Consumer Economics: Empirical Analysis
- L11 Production, Pricing, and Market Structure; Size Distribution of Firms
- L12 Monopoly; Monopolization Strategies
- L81 Retail and Wholesale Trade; e-Commerce