Advance-purchase discounts as a price discrimination device
AbstractIn an intertemporal setting in which individual uncertainty is resolved over time, advance-purchase discounts can serve to price discriminate between consumers with different expected valuations for the product. Consumers with a high expected valuation purchase the product before learning their actual valuation at the offered advance-purchase discount; consumers with a low expected valuation will wait and purchase the good at the regular price only in the event where their realized valuation is high. We characterize the profit-maximizing pricing strategy of the monopolist. Furthermore, adopting a mechanism design perspective, we provide a necessary and sufficient condition under which advance-purchase discounts implement the monopolist's optimal mechanism.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Theory.
Volume (Year): 146 (2011)
Issue (Month): 1 (January)
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Web page: http://www.elsevier.com/locate/inca/622869
Advance-purchase discount Introductory offers Demand uncertainty Monopoly pricing Price discrimination Intertemporal pricing Mechanism design;
Other versions of this item:
- Nocke, Volker & Peitz, Martin, 2008. "Advance-Purchase Discounts as a Price Discrimination Device," CEPR Discussion Papers 6664, C.E.P.R. Discussion Papers.
- D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
- L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
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