The Micro-foundations of Intertemporal Price Discrimination
AbstractThis paper investigates the optimality of intertemporal price discrimination for a durable-good monopoly in a model where infinitely-lived households face an intertemporal budget constraint, and consume both durable goods and non-durable goods. We prove that the optimal price of the durable good is not constant, and may decrease or increase over time. Some households may choose to purchase the durable good at a later date, and pay lower or higher prices, since the gain in discounted utility of consuming more of the non-durable good more than compensates for the loss in utility from delaying the consumption of the durable good.
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Bibliographic InfoPaper provided by East Asian Bureau of Economic Research in its series Microeconomics Working Papers with number 22456.
Date of creation: Jan 2005
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Intertemporal price discrimination; durable good monopoly; optimal pricing strategy; household demand;
Other versions of this item:
- Winston Koh, 2006. "The micro-foundations of intertemporal price discrimination," Economic Theory, Springer, Springer, vol. 27(2), pages 393-410, January.
- Winston T.H. Koh, 2005. "The Micro-foundations of Intertemporal Price Discrimination," Working Papers, Singapore Management University, School of Economics 04-2005, Singapore Management University, School of Economics.
- D40 - Microeconomics - - Market Structure and Pricing - - - General
- D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
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