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Intertemporal Price Discrimination and Sticky Prices

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  • Louis Phlips

Abstract

It is shown that potential entry leads to a marginal-revenue-below-marginal-cost rule, while the possibility of building up inventories (voluntarily!) leads to the intertemporal price discrimination rule, which provides a formal rationalization for normal costing. Equilibrium conditions for a group of firms are derived, using the intertemporal discrimination rule. These conditions can be written as linear estimating equations, with regression coefficients explicitly linked with parameters representing market structure. They imply that, in more concentrated industries, cost increases are less fully transmitted and changes in demand are more fully transmitted into prices than in less concentrated industries.

Suggested Citation

  • Louis Phlips, 1980. "Intertemporal Price Discrimination and Sticky Prices," The Quarterly Journal of Economics, Oxford University Press, vol. 94(3), pages 525-542.
  • Handle: RePEc:oup:qjecon:v:94:y:1980:i:3:p:525-542.
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    File URL: http://hdl.handle.net/10.2307/1884583
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    Citations

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    Cited by:

    1. Goodwin, Barry K., 1992. "Forecasting Cattle Prices in the Presence of Structural Change," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 24(2), pages 11-22, December.
    2. Nitzan, Jonathan, 1992. "Inflation As Restructuring. A Theoretical and Empirical Account of the U.S. Experience," EconStor Theses, ZBW - Leibniz Information Centre for Economics, number 157989, February.
    3. Tian Xia & Brian Sancewich, 2018. "Interaction between buyer power in agricultural procurement and seller power in food retailing, and optimal allocation of anti-trust efforts," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 6(1), pages 1-19, December.
    4. Maman Setiawan & Grigorios Emvalomatis & Alfons Oude Lansink, 2015. "Price Rigidity and Industrial Concentration: Evidence from the Indonesian Food and Beverages Industry," Asian Economic Journal, East Asian Economic Association, vol. 29(1), pages 61-72, March.
    5. Weiss, Christoph R., 1995. "Determinants of price flexibility in oligopolistic markets: Evidence from austrian manufacturing," Journal of Economics and Business, Elsevier, vol. 47(5), pages 423-439, December.
    6. Blinder, Alan S, 1982. "Inventories and Sticky Prices: More on the Microfoundations of Macroeconomics," American Economic Review, American Economic Association, vol. 72(3), pages 334-348, June.
    7. Revoredo-Giha, Cesar & Nadolnyak, Denis A. & Fletcher, Stanley M., 2004. "Explaining Price Transmission Asymmetry In The Us Peanut Marketing Chain," 2004 Annual meeting, August 1-4, Denver, CO 20363, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    8. M. Ishaq Nadiri, 1986. "Price Inertia and Inflation: Evidence and Theoretical Rationale," NBER Working Papers 2022, National Bureau of Economic Research, Inc.
    9. Lourdes Martín & Diego Rodríguez, 2004. "Pricing to market at firm level," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 140(2), pages 302-320, June.
    10. Lim, Yoonsung & Kim, Jeong-Yoo & Berg, Nathan, 2015. "Price asymmetry revisited from a marketing perspective," Economic Modelling, Elsevier, vol. 49(C), pages 314-319.
    11. Louis Phlips, 1981. "Welfare and price discrimination : optimal departures from uniform pricing," Working Papers hal-01527244, HAL.

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