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  3. American Economic Review
  4. November 2016
  5. Intertemporal Price Discrimination: Dynamic Arrivals and Changing Values

Intertemporal Price Discrimination: Dynamic Arrivals and Changing Values

  • Daniel F. Garrett
American Economic Review
vol. 106, no. 11, November 2016
(pp. 3275-99)
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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.

Citation

Garrett, Daniel F. 2016. "Intertemporal Price Discrimination: Dynamic Arrivals and Changing Values." American Economic Review, 106 (11): 3275-99. DOI: 10.1257/aer.20130564

Additional Materials

JEL Classification

  • D42 Market Structure, Pricing, and Design: Monopoly
  • D82 Asymmetric and Private Information; Mechanism Design
  • L12 Monopoly; Monopolization Strategies
  • L81 Retail and Wholesale Trade; e-Commerce