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On Price Discrimination by Rationing

Author

Listed:
  • Hans Jørgen Jacobsen

    (Institute of Economics, University of Copenhagen)

  • Christian Schultz

    (Institute of Economics, University of Copenhagen)

Abstract

Price discrimination and rationing of low price customers can often be observed (viz. flight and theater tickets, sales of branded goods). We construct a monopoly model to explain this phenomenon. A firm has the option to charge a high price on a 'day 1', and a low price on a 'day 2', and ration customers stochastically on day 2. We give neccessary and sufficient conditions for 'price discrimination by rationing' to be optimal, assuming that the firm can commit itself to its day 2 actions. Without commitment a problem of subgame perfection arises. However, the price discriminatory, one period, commitment outcome is supported by (reputation) equilibria of a repeated version of the 'game'.

Suggested Citation

  • Hans Jørgen Jacobsen & Christian Schultz, 1991. "On Price Discrimination by Rationing," Discussion Papers 91-19, University of Copenhagen. Department of Economics.
    • Handle: RePEc:kud:kuiedp:9119
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