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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 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.

Suggested Citation

  • Graddy, Kathryn & Hall, George, 2009. "A Dynamic Model of Price Discrimination and Inventory Management at the Fulton Fish Market," CEPR Discussion Papers 7315, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:7315
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    References listed on IDEAS

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    2. Victor Aguirregabiria, 1999. "The Dynamics of Markups and Inventories in Retailing Firms," Review of Economic Studies, Oxford University Press, vol. 66(2), pages 275-308.
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    7. Kathryn Graddy & Peter Kennedy, 2010. "When Are Supply And Demand Determined Recursively Rather Than Simultaneously?," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 36(2), pages 188-197, Spring.
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    Cited by:

    1. Benjamin Reed Shiller, 2013. "First Degree Price Discrimination Using Big Data," Working Papers 58, Brandeis University, Department of Economics and International Businesss School, revised Jan 2014.

    More about this item

    Keywords

    dynamic programming; fish; indirect inference; price discrimination; yield management;

    JEL classification:

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

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