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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- 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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- Ault, Richard W, et al, 2000. "Rebates, Inventories, and Intertemporal Price Discrimination," Economic Inquiry, Western Economic Association International, vol. 38(4), pages 570-578, October.
- Varian, Hal R., 1989. "Price discrimination," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 10, pages 597-654 Elsevier.
- Nancy L. Stokey, 1979. "Intertemporal Price Discrimination," The Quarterly Journal of Economics, Oxford University Press, vol. 93(3), pages 355-371.
- Michael Landsberger & Isaac Meilijson, 1985. "Intertemporal Price Discrimination and Sales Strategy under Incomplete Information," RAND Journal of Economics, The RAND Corporation, vol. 16(3), pages 424-430, Autumn. Full references (including those not matched with items on IDEAS)
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