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Household Demand, Network Externality Effects and Intertemporal Price Discrimination

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  • Winston T. H. Koh

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Abstract

This paper examines the optimality of intertemporal price discrimination when network externality effects are present in the consumption of a durable good. We conduct our study in two settings. In a model with two household types, utilities are dependent on the cumulative proportion of households that have purchased the durable good. Next, in a model with a continuum of household types, we extend the analysis to the case where households consume both a durable good and a stream of non-durable goods. We show that in both settings, the presence of network externalities facilitates a sales strategy with intertemporal price discrimination. Copyright Springer-Verlag Wien 2005

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File URL: http://hdl.handle.net/10.1007/s00712-004-0100-z
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Bibliographic Info

Article provided by Springer in its journal Journal of Economics - Zeitschrift für Nationalökonomie.

Volume (Year): 84 (2005)
Issue (Month): 1 (02)
Pages: 49-69

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Handle: RePEc:kap:jeczfn:v:84:y:2005:i:1:p:49-69

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Web page: http://www.springerlink.com/link.asp?id=108909

Related research

Keywords: intertemporal price discrimination; durable good; household demand; network externality; D40;

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  1. Cabral, Luis M. B. & Salant, David J. & Woroch, Glenn A., 1999. "Monopoly pricing with network externalities," International Journal of Industrial Organization, Elsevier, vol. 17(2), pages 199-214, February.
  2. Van Cayseele, Patrick, 1991. "Consumer rationing and the posssibility of intertemporal price discrimination," European Economic Review, Elsevier, vol. 35(7), pages 1473-1484, October.
  3. Conlisk, John & Gerstner, Eitan & Sobel, Joel, 1984. "Cyclic Pricing by a Durable Goods Monopolist," The Quarterly Journal of Economics, MIT Press, vol. 99(3), pages 489-505, August.
  4. Sobel, Joel, 1984. "The Timing of Sales," Review of Economic Studies, Wiley Blackwell, vol. 51(3), pages 353-68, July.
  5. Stokey, Nancy L, 1979. "Intertemporal Price Discrimination," The Quarterly Journal of Economics, MIT Press, vol. 93(3), pages 355-71, August.
  6. Ault, Richard W, et al, 2000. "Rebates, Inventories, and Intertemporal Price Discrimination," Economic Inquiry, Western Economic Association International, vol. 38(4), pages 570-78, October.
  7. Coase, Ronald H, 1972. "Durability and Monopoly," Journal of Law and Economics, University of Chicago Press, vol. 15(1), pages 143-49, April.
  8. Mason, Robin, 2000. "Network externalities and the Coase conjecture," European Economic Review, Elsevier, vol. 44(10), pages 1981-1992, December.
  9. Locay, Luis & Rodriguez, Alvaro, 1992. "Price Discrimination in Competitive Markets," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 954-65, October.
  10. Karp, Larry, 1995. "Depreciation Erodes the Coase Conjecture," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt1fs6j5nn, Department of Agricultural & Resource Economics, UC Berkeley.
  11. Clerides, Sofronis K., 2002. "Book value: intertemporal pricing and quality discrimination in the US market for books," International Journal of Industrial Organization, Elsevier, vol. 20(10), pages 1385-1408, December.
  12. Bensaid, Bernard & Lesne, Jean-Philippe, 1996. "Dynamic monopoly pricing with network externalities," International Journal of Industrial Organization, Elsevier, vol. 14(6), pages 837-855, October.
  13. Varian, Hal R., 1989. "Price discrimination," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 10, pages 597-654 Elsevier.
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