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Intertemporal Price Discrimination in Storable Goods Markets

Author

Listed:
  • Igal Hendel
  • Aviv Nevo

Abstract

We study intertemporal price discrimination when consumers can store for future consumption needs. We offer a simple model of demand dynamics, which we estimate using market-level data. Optimal pricing involves temporary price reductions that enable sellers to discriminate between price sensitive consumers, who stockpile for future consumption, and less price-sensitive consumers, who do not stockpile. We empirically quantify the impact of intertemporal price discrimination on profits and welfare. We find that sales (i ) capture 25-30 percent of the gap between non-discriminatory profits and (unattainable) third-degree price discrimination profits, (ii ) increase total welfare, and (iii) have a modest impact on consumer welfare.

Suggested Citation

  • Igal Hendel & Aviv Nevo, 2013. "Intertemporal Price Discrimination in Storable Goods Markets," American Economic Review, American Economic Association, vol. 103(7), pages 2722-2751, December.
  • Handle: RePEc:aea:aecrev:v:103:y:2013:i:7:p:2722-51
    Note: DOI: 10.1257/aer.103.7.2722
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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