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Price discrimination on booking time

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  • Ata, Barış
  • Dana, James D.

Abstract

Even if consumers are forward looking and free to choose when to purchase, a firm can price discriminate on booking time if consumers learn their valuations at different times and consumers who learn later have higher valuations. The model is related to our work on optimal screening with returns contracts Akan, Ata, and Dana [1], but here we consider a simpler binary-valuation distribution and consider more realistic consumer learning assumptions. The main contribution is to show that the profitability of screening on time is robust to relaxing the assumption that consumers learn instantaneously. In addition to analyzing a bad-news model in which information arrives gradually, we characterize a general bound on consumer optimism that guarantees that the instantaneous learning results are robust.

Suggested Citation

  • Ata, Barış & Dana, James D., 2015. "Price discrimination on booking time," International Journal of Industrial Organization, Elsevier, vol. 43(C), pages 175-181.
    • Handle: RePEc:eee:indorg:v:43:y:2015:i:c:p:175-181
    DOI: 10.1016/j.ijindorg.2015.06.002
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    References listed on IDEAS

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    10. Gale, Ian L & Holmes, Thomas J, 1993. "Advance-Purchase Discounts and Monopoly Allocation of Capacity," American Economic Review, American Economic Association, vol. 83(1), pages 135-146, March.
    11. Alessandro Pavan & Ilya Segal & Juuso Toikka, 2014. "Dynamic Mechanism Design: A Myersonian Approach," Econometrica, Econometric Society, vol. 82(2), pages 601-653, March.
    12. Nancy L. Stokey, 1979. "Intertemporal Price Discrimination," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 93(3), pages 355-371.
    13. Akan, Mustafa & Ata, Barış & Dana, James D., 2015. "Revenue management by sequential screening," Journal of Economic Theory, Elsevier, vol. 159(PB), pages 728-774.
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    Citations

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    Cited by:

    1. Didier Laussel & Ngo V. Long & Joana Resende, 2020. "The curse of knowledge: having access to customer information can reduce monopoly profits," RAND Journal of Economics, RAND Corporation, vol. 51(3), pages 650-675, September.
    2. Heumann, Tibor, 2020. "Information design and sequential screening with ex post participation constraint," Theoretical Economics, Econometric Society, vol. 15(1), January.
    3. Akan, Mustafa & Ata, Barış & Dana, James D., 2015. "Revenue management by sequential screening," Journal of Economic Theory, Elsevier, vol. 159(PB), pages 728-774.
    4. Brendan Cushing-Daniels, 2020. "Rethinking Profit-Maximization in Second-Degree Price Discriminating Markets," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 48(2), pages 223-235, June.
    5. James D. Dana Jr. & Kevin R. Williams, 2018. "Intertemporal Price Discrimination in Sequential Quantity-Price Games," Cowles Foundation Discussion Papers 2136R3, Cowles Foundation for Research in Economics, Yale University, revised Feb 2020.
    6. James D. Dana Jr. & Kevin R. Williams, 2018. "This paper develops an oligopoly model in which firms first choose capacity and then compete in prices in a series of advance-purchase markets. We show the existence of multiple sales opportunities cr," Cowles Foundation Discussion Papers 2136R4, Cowles Foundation for Research in Economics, Yale University, revised Nov 2021.
    7. James D. Dana Jr. & Kevin R. Williams, 2018. "Oligopoly Price Discrimination: The Role of Inventory Controls," Cowles Foundation Discussion Papers 2136, Cowles Foundation for Research in Economics, Yale University.
    8. James D. Dana & Kevin R. Williams, 2022. "Intertemporal Price Discrimination in Sequential Quantity-Price Games," Marketing Science, INFORMS, vol. 41(5), pages 966-981, September.
    9. James D. Dana Jr. & Kevin R. Williams, 2020. "Intertemporal Price Discrimination in Sequential Quantity-Price Games," NBER Working Papers 26794, National Bureau of Economic Research, Inc.
    10. James D. Dana Jr. & Kevin R. Williams, 2018. "Oligopoly Price Discrimination: The Role of Inventory Controls," Cowles Foundation Discussion Papers 2136R, Cowles Foundation for Research in Economics, Yale University, revised Sep 2018.
    11. Chengyan Gu, 2023. "Market segmentation and dynamic price discrimination in the U.S. airline industry," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 22(5), pages 338-361, October.
    12. James D. Dana Jr. & Kevin R. Williams, 2018. "Intertemporal Price Discrimination in Sequential Quantity-Price Games," Cowles Foundation Discussion Papers 2136R2, Cowles Foundation for Research in Economics, Yale University, revised Mar 2019.
    13. Emil Temnyalov, 2019. "Points mechanisms and rewards programs," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 28(3), pages 436-457, June.

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    More about this item

    Keywords

    Price Discrimination; Monopoly; Mechanism Design;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design

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