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Advance-Purchase Discounts as a Price Discrimination Device

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  • Nocke, Volker
  • Peitz, Martin

Abstract

In an intertemporal setting in which individual uncertainty is resolved over time, advance-purchase discounts can serve to price discriminate between consumers with different expected valuations for the same product. Consumers with a high expected valuation purchase the product before learning their actual valuation at the offered advance-purchase discount; consumers with a low expected valuation will wait and purchase the good at the regular price only in the event where their realized valuation is high. We provide a necessary and sufficient condition under which the monopolist's optimal intertemporal selling policy features such advance-purchase discounts.

Suggested Citation

  • Nocke, Volker & Peitz, Martin, 2008. "Advance-Purchase Discounts as a Price Discrimination Device," CEPR Discussion Papers 6664, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:6664
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    References listed on IDEAS

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    More about this item

    Keywords

    advance-purchase discount; demand uncertainty; intertemporal pricing; introductory offers; monopoly pricing; price discrimination;

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies

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