The Micro-foundations of Intertemporal Price Discrimination
This paper investigates the optimality of intertemporal price discrimination for a durable-good monopoly in a model where infinitely-lived households face an intertemporal budget constraint, and consume both durable goods and non-durable goods. We prove that the optimal price of the durable good is not constant, and may decrease or increase over time. Some households may choose to purchase the durable good at a later date, and pay lower or higher prices, since the gain in discounted utility of consuming more of the non-durable good more than compensates for the loss in utility from delaying the consumption of the durable good.
|Date of creation:||Jan 2005|
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|Publication status:||Published in SMU Economics and Statistics Working Paper Series|
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- Ault, Richard W, et al, 2000. "Rebates, Inventories, and Intertemporal Price Discrimination," Economic Inquiry, Western Economic Association International, vol. 38(4), pages 570-78, October.
- Aldo Rustichini & Anne P. Villamil, 2000. "Intertemporal pricing in laboratory posted offer markets with differential information," Economic Theory, Springer, vol. 16(3), pages 613-637.
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