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A Dynamic Model of Price Discrimination and Inventory Management at the Fulton Fish Market

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  • Kathryn Graddy
  • George Hall

Abstract

We estimate a dynamic profit-maximization model of a fish wholesaler who can observe consumer characteristics, set individual prices, and thus engage in third-degree price discrimination. Simulated prices and quantities from the model exhibit the key features observed in a set of high quality transaction-level data on fish sales collected at the Fulton fish market. The model's predictions are then compared to the case in which the dealer must post a single price to all customers. We find the cost to the dealer of posting a uniform price to be extremely small.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15019.

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Date of creation: May 2009
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Handle: RePEc:nbr:nberwo:15019

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  1. T. M. Whitin, 1955. "Inventory Control and Price Theory," Management Science, INFORMS, vol. 2(1), pages 61-68, October.
  2. Angrist, Joshua D & Graddy, Kathryn & Imbens, Guido W, 2000. "The Interpretation of Instrumental Variables Estimators in Simultaneous Equations Models with an Application to the Demand for Fish," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 499-527, July.
  3. Villas-Boas, Sofia B, 2006. "An empirical investigation of the welfare effects of banning wholesale price discrimination," CUDARE Working Paper Series 1017R3, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy, revised Oct 2008.
  4. Andrew Sweeting, 2008. "Equilibrium Price Dynamics in Perishable Goods Markets: The Case of Secondary Markets for Major League Baseball Tickets," NBER Working Papers 14505, National Bureau of Economic Research, Inc.
  5. Sokbae 'Simon' Lee, 2004. "Endogeneity in quantile regression models: a control function approach," CeMMAP working papers CWP08/04, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  6. John Rust & Hui Man Chan & George Hall, 2004. "Price Discrimination in the Steel Market," 2004 Meeting Papers 44, Society for Economic Dynamics.
  7. John Rust & George Hall, 2001. "Middle Men Versus Market Makers: A Theory of Competitive Exchange," Cowles Foundation Discussion Papers 1299, Cowles Foundation for Research in Economics, Yale University.
  8. Graddy, Kathryn, 2006. "Markets: The Fulton Fish Market," CEPR Discussion Papers 5508, C.E.P.R. Discussion Papers.
  9. Wedad Elmaghraby & P{\i}nar Keskinocak, 2003. "Dynamic Pricing in the Presence of Inventory Considerations: Research Overview, Current Practices, and Future Directions," Management Science, INFORMS, vol. 49(10), pages 1287-1309, October.
  10. Kathryn Graddy, 1995. "Testing for Imperfect Competition at the Fulton Fish Market," RAND Journal of Economics, The RAND Corporation, vol. 26(1), pages 75-92, Spring.
  11. Adam Copeland & Wendy Dunn & George Hall, 2011. "Inventories and the automobile market," RAND Journal of Economics, RAND Corporation, vol. 42(1), pages 121-149, 03.
  12. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard, 1986. "Fairness as a Constraint on Profit Seeking: Entitlements in the Market," American Economic Review, American Economic Association, vol. 76(4), pages 728-41, September.
  13. Ayres, Ian & Siegelman, Peter, 1995. "Race and Gender Discrimination in Bargaining for a New Car," American Economic Review, American Economic Association, vol. 85(3), pages 304-21, June.
  14. Kathryn Graddy & Peter Kennedy, 2010. "When Are Supply And Demand Determined Recursively Rather Than Simultaneously?," Eastern Economic Journal, Palgrave Macmillan, vol. 36(2), pages 188-197, Spring.
  15. Wang, Ruqu, 1995. "Bargaining versus posted-price selling," European Economic Review, Elsevier, vol. 39(9), pages 1747-1764, December.
  16. Aguirregabiria, Victor, 1999. "The Dynamics of Markups and Inventories in Retailing Firms," Review of Economic Studies, Wiley Blackwell, vol. 66(2), pages 275-308, April.
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Cited by:
  1. Benjamin Reed Shiller, 2013. "First Degree Price Discrimination Using Big Data," Working Papers 58, Brandeis University, Department of Economics and International Businesss School, revised Sep 2013.

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