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Replacement Cycles, Income Distribution, And Dynamic Price Discrimination

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  • Eduardo Correia de Souza
  • Jorge Chami Batista

Abstract

This article analyses how income distribution, Intellectual Property Rights and other regulatory policies such as minimum quality standards determine pricing strategies in a dynamic context where a monopolist periodically introduces new generations or upgrades of a durable good. Discrimination through quality and screening in this article takes place in a context where consumers buy several versions of the durable good during their lifetime, instead of a single version as in Inderst's (2008) or Koh's (2006). It also differs from Glass (2001) in that an equilibrium may emerge in which different consumer types replace their durable generations with different frequencies. Our modelling is motivated by stylized facts from the last Brazilian POF (household budget survey).
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Suggested Citation

  • Eduardo Correia de Souza & Jorge Chami Batista, 2007. "Replacement Cycles, Income Distribution, And Dynamic Price Discrimination," Anais do XXXV Encontro Nacional de Economia [Proceedings of the 35th Brazilian Economics Meeting] 019, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
  • Handle: RePEc:anp:en2007:019
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    File URL: http://www.anpec.org.br/encontro2007/artigos/A07A019.pdf
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    1. Takeyama, Lisa N, 1997. "The Intertemporal Consequences of Unauthorized Reproduction of Intellectual Property," Journal of Law and Economics, University of Chicago Press, vol. 40(2), pages 511-522, October.
    2. Dan Horsky, 1990. "A Diffusion Model Incorporating Product Benefits, Price, Income and Information," Marketing Science, INFORMS, vol. 9(4), pages 342-365.
    3. Inderst, Roman, 2008. "Durable goods with quality differentiation," Economics Letters, Elsevier, vol. 100(2), pages 173-177, August.
    4. Jaskold Gabszewicz, J. & Thisse, J. -F., 1979. "Price competition, quality and income disparities," Journal of Economic Theory, Elsevier, vol. 20(3), pages 340-359, June.
    5. Bagnoli, Mark & Salant, Stephen W & Swierzbinski, Joseph E, 1995. "Intertemporal Self-Selection with Multiple Buyers," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 5(3), pages 513-526, May.
    6. Winston Koh, 2006. "The micro-foundations of intertemporal price discrimination," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 27(2), pages 393-410, January.
    7. Amy Jocelyn Glass, 2001. "Price discrimination and quality improvement," Canadian Journal of Economics, Canadian Economics Association, vol. 34(2), pages 549-569, May.
    8. Nancy L. Stokey, 1979. "Intertemporal Price Discrimination," The Quarterly Journal of Economics, Oxford University Press, vol. 93(3), pages 355-371.
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