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A Dynamic Model of Price Discrimination and Inventory Management at the Fulton Fish Market

  • Graddy, Kathryn
  • Hall, George

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 dealer must post a single price to all customers. We find the cost to the dealer of posting a uniform price to be extremely small.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7315.

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Date of creation: Jun 2009
Date of revision:
Handle: RePEc:cpr:ceprdp:7315
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  1. repec:oup:restud:v:67:y:2000:i:3:p:499-527 is not listed on IDEAS
  2. Adam Copeland & Wendy Dunn & George Hall, 2011. "Inventories and the automobile market," RAND Journal of Economics, RAND Corporation, vol. 42(1), pages 121-149, 03.
  3. Lee, Sokbae, 2007. "Endogeneity in quantile regression models: A control function approach," Journal of Econometrics, Elsevier, vol. 141(2), pages 1131-1158, December.
  4. Kathryn Graddy, 2006. "Markets,The Fulton Fish Market," Economics Series Working Papers 254, University of Oxford, Department of Economics.
  5. Villas-Boas, Sofia B, 2006. "An empirical investigation of the welfare effects of banning wholesale price discrimination," CUDARE Working Paper Series 1017R3, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy, revised Oct 2008.
  6. T. M. Whitin, 1955. "Inventory Control and Price Theory," Management Science, INFORMS, vol. 2(1), pages 61-68, October.
  7. Smith, A A, Jr, 1993. "Estimating Nonlinear Time-Series Models Using Simulated Vector Autoregressions," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(S), pages S63-84, Suppl. De.
  8. John Rust & George Hall, 2001. "Middle Men Versus Market Makers: A Theory of Competitive Exchange," Cowles Foundation Discussion Papers 1299, Cowles Foundation for Research in Economics, Yale University.
  9. Kathryn Graddy & Peter Kennedy, 2010. "When Are Supply And Demand Determined Recursively Rather Than Simultaneously?," Eastern Economic Journal, Palgrave Macmillan, vol. 36(2), pages 188-197, Spring.
  10. John Rust & Hui Man Chan & George Hall, 2004. "Price Discrimination in the Steel Market," 2004 Meeting Papers 44, Society for Economic Dynamics.
  11. Wang, Ruqu, 1995. "Bargaining versus posted-price selling," European Economic Review, Elsevier, vol. 39(9), pages 1747-1764, December.
  12. Andrew Sweeting, 2008. "Equilibrium Price Dynamics in Perishable Goods Markets: The Case of Secondary Markets for Major League Baseball Tickets," NBER Working Papers 14505, National Bureau of Economic Research, Inc.
  13. repec:oup:restud:v:66:y:1999:i:2:p:275-308 is not listed on IDEAS
  14. Graddy, K., 1993. "Testing for Imperfect Competition at the Fulton Fish Market," Papers 137, Princeton, Department of Economics - Financial Research Center.
  15. Severin Borenstein, 1991. "Selling Costs and Switching Costs: Explaining Retail Gasoline Margins," RAND Journal of Economics, The RAND Corporation, vol. 22(3), pages 354-369, Autumn.
  16. Wedad Elmaghraby & P{\i}nar Keskinocak, 2003. "Dynamic Pricing in the Presence of Inventory Considerations: Research Overview, Current Practices, and Future Directions," Management Science, INFORMS, vol. 49(10), pages 1287-1309, October.
  17. Ayres, Ian & Siegelman, Peter, 1995. "Race and Gender Discrimination in Bargaining for a New Car," American Economic Review, American Economic Association, vol. 85(3), pages 304-21, June.
  18. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard, 1986. "Fairness as a Constraint on Profit Seeking: Entitlements in the Market," American Economic Review, American Economic Association, vol. 76(4), pages 728-41, September.
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