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Advance-Purchase Discounts as a Price Discrimination Device

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  • Nocke, Volker
  • Peitz, Martin

Abstract

In 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 same 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 provide a necessary and sufficient condition under which the monopolist's optimal intertemporal selling policy features such advance-purchase discounts.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6664.

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Date of creation: Jan 2008
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Handle: RePEc:cpr:ceprdp:6664

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Keywords: advance-purchase discount; demand uncertainty; intertemporal pricing; introductory offers; monopoly pricing; price discrimination;

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References

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Citations

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Cited by:
  1. Oksana Loginova & X. Hnery Wang & Chenhang Zeng, 2012. "Advance Selling in the Presence of Experienced Consumers," Working Papers 1213, Department of Economics, University of Missouri.
  2. Zhang, Tianle, 2010. "Advance-Purchase Programs: When to Introduce and What to Inform Consumers," MPRA Paper 25606, University Library of Munich, Germany.
  3. Oksana Loginova, 2013. "Pricing Strategies in Advance Selling: Should a Retailer Offer Pre-order Price Guarantee?," Working Papers 1303, Department of Economics, University of Missouri.
  4. BELLEFLAMME, Paul & LAMBERT, Thomas & SCHWIENBACHER, Armin, 2011. "Crowdfunding: tapping the right crowd," CORE Discussion Papers 2011032, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. Seongman Moon & Makoto Watanabe, 2011. "Refundability and Price: Empirical Analysis on the Airline Industry," Working Papers 1107, Research Institute for Market Economy, Sogang University.

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