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Household Demand, Network Externality Effects and Intertemporal Price Discrimination

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  • Winston T.H. Koh

    (SMU)

Abstract

This paper examines the optimality of intertemporal price discrimination when network externality effects are present in the consumption of a durable good. We conduct our study in two settings. In a model with two household types, utilities are dependent on the cumulative proportion of households that have purchased the durable good. Next, in a model with a continuum of household types, we extend the analysis to the case where households consume both a durable good and a stream of non-durable goods. We show that in both settings, the presence of network externalities facilitates a sales strategy with intertemporal price discrimination.

Suggested Citation

  • Winston T.H. Koh, 2005. "Household Demand, Network Externality Effects and Intertemporal Price Discrimination," Microeconomics Working Papers 22455, East Asian Bureau of Economic Research.
    • Handle: RePEc:eab:microe:22455
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    References listed on IDEAS

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    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General

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