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.
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Publisher Info
Paper provided by Singapore Management University, School of Economics in its series Working Papers with number
05-2005.
Length: 23 pages Date of creation: Mar 2005 Date of revision: Publication status: Published in SMU Economics and Statistics Working Paper Series Handle: RePEc:siu:wpaper:05-2005
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