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Intertemporal price discrimination with two products

Author

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  • Jean‐Charles Rochet
  • John Thanassoulis

Abstract

We study the two‐product monopoly profit maximization problem for a seller who can commit to a dynamic pricing strategy. We show that if consumers' valuations are not strongly ordered, then optimality for the seller can require intertemporal price discrimination: the seller offers a choice between supplying a complete bundle now, or delaying the supply of a component of that bundle until a later date. For general valuations, we establish a sufficient condition for such dynamic pricing to be more profitable than mixed bundling. So we show that the established no‐discrimination‐across‐time result does not extend to two‐product sellers under standard taste distributions.

Suggested Citation

  • Jean‐Charles Rochet & John Thanassoulis, 2019. "Intertemporal price discrimination with two products," RAND Journal of Economics, RAND Corporation, vol. 50(4), pages 951-973, December.
    • Handle: RePEc:bla:randje:v:50:y:2019:i:4:p:951-973
    DOI: 10.1111/1756-2171.12301
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    Cited by:

    1. Schäfers, Sebastian, 2022. "Product Lotteries and Loss Aversion," Working papers 2022/06, Faculty of Business and Economics - University of Basel.
    2. Seres Gyula, 2024. "Uncertain Commitment Power in a Durable Good Monopoly," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 24(2), pages 599-619.
    3. Stéphane Gauthier & Guy Laroque, 2021. "Certainty Equivalence and Noisy Redistribution," Working Papers halshs-03359574, HAL.
    4. Carlier, Guillaume & Dupuis, Xavier & Rochet, Jean-Charles & Thanassoulis, John, 2024. "A general solution to the quasi linear screening problem," Journal of Mathematical Economics, Elsevier, vol. 114(C).
    5. Rochet, Jean-Charles, 2024. "Multidimensional screening after 37 years," Journal of Mathematical Economics, Elsevier, vol. 113(C).
    6. Buehler, Stefan & Eschenbaum, Nicolas, 2021. "Dynamic Monopoly Pricing With Multiple Varieties: Trading Up," Economics Working Paper Series 2113, University of St. Gallen, School of Economics and Political Science.
    7. Chang, Dongkyu, 2021. "Optimal sales mechanism with outside options," Journal of Economic Theory, Elsevier, vol. 195(C).

    More about this item

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly

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