Household Demand, Network Externality Effects and Intertemporal Price Discrimination
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.
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| Length: | 23 pages |
| Date of creation: | Mar 2005 |
| Publication status: | Published in SMU Economics and Statistics Working Paper Series |
| Handle: | RePEc:siu:wpaper:05-2005 |
| Contact details of provider: | Postal: 90 Stamford Road, Singapore 178903 Phone: 65-6828 0832 Fax: 65-6828 0833 Web page: http://www.economics.smu.edu.sg/ More information through EDIRC
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References listed on IDEAS
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- Coase, Ronald H, 1972. "Durability and Monopoly," Journal of Law and Economics, University of Chicago Press, vol. 15(1), pages 143-149, April.
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- Luis Cabral & David Salant & Glenn Woroch, 1994. "Monopoly Pricing With Network Externalities," Industrial Organization 9411003, EconWPA.
- Locay, Luis & Rodriguez, Alvaro, 1992. "Price Discrimination in Competitive Markets," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 954-965, October. Full references (including those not matched with items on IDEAS)
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