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Intertemporal Price Discrimination with Two Products

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  • Thanassoulis, John
  • Rochet, Jean Charles

Abstract

We study the two-product monopoly profit maximisation problem for a seller who can commit to a dynamic pricing strategy. We show that if consumers' valuations are not strongly-ordered then optimality for the seller can require intertemporal price discrimination: the seller offers a choice between supplying a complete bundle now, or delaying the supply of a component of that bundle until a later date. For general valuations we establish a sufficient condition for such dynamic pricing to be more profitable than mixed bundling. So we show that the Stokey (1979) no-discrimination-across-time result does not extend to two-product sellers when consumers' valuations are drawn from many standard distributions.

Suggested Citation

  • Thanassoulis, John & Rochet, Jean Charles, 2017. "Intertemporal Price Discrimination with Two Products," CEPR Discussion Papers 12034, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:12034
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    Cited by:

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    3. Seres, Gyula, 2019. "Uncertain Commitment Power in a Durable Good Monopoly," Discussion Paper 201-012, Tilburg University, Center for Economic Research.
    4. Schäfers, Sebastian, 2022. "Product Lotteries and Loss Aversion," Working papers 2022/06, Faculty of Business and Economics - University of Basel.
    5. Chang, Dongkyu, 2021. "Optimal sales mechanism with outside options," Journal of Economic Theory, Elsevier, vol. 195(C).

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    More about this item

    Keywords

    Multidimensional mechanism design; Cross-sell; Second degree price discrimination; Bundling; Time discounting; Substitutes and complements;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly

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