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A dynamic model of price discrimination and inventory management at the Fulton Fish Market

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  • Graddy, Kathryn
  • Hall, George

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 wholesaler must post a single price to all retailers. We find the added revenue the wholesaler receives from price discriminating to be small.

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  • Graddy, Kathryn & Hall, George, 2011. "A dynamic model of price discrimination and inventory management at the Fulton Fish Market," Journal of Economic Behavior & Organization, Elsevier, vol. 80(1), pages 6-19.
    • Handle: RePEc:eee:jeborg:v:80:y:2011:i:1:p:6-19
    DOI: 10.1016/j.jebo.2010.08.018
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    Cited by:

    1. Gaurab Aryal & Charles Murry & Jonathan W. Williams, 2018. "Price Discrimination in International Airline Markets," Boston College Working Papers in Economics 968, Boston College Department of Economics.
    2. Tang, Le, 2021. "Investment dynamics and capital distortion: State and non-state firms in China," Journal of Asian Economics, Elsevier, vol. 73(C).
    3. Elsler, Laura G. & Drohan, Sarah E. & Schlüter, Maja & Watson, James R. & Levin, Simon A., 2019. "Local, Global, Multi-Level: Market Structure and Multi-Species Fishery Dynamics," Ecological Economics, Elsevier, vol. 156(C), pages 185-195.
    4. Ayelet Israeli & Fiona Scott-Morton & Jorge Silva-Risso & Florian Zettelmeyer, 2022. "How Market Power Affects Dynamic Pricing: Evidence from Inventory Fluctuations at Car Dealerships," Management Science, INFORMS, vol. 68(2), pages 895-916, February.
    5. Benjamin Reed Shiller, 2013. "First Degree Price Discrimination Using Big Data," Working Papers 58, Brandeis University, Department of Economics and International Business School, revised Jan 2014.

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    More about this item

    Keywords

    Fish; Price discrimination; Yield management; Dynamic programming; Indirect inference;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General

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