Article

Intertemporal price discrimination: dynamic arrivals and changing values

Daniel F. Garrett

Abstract

We study the profit-maximizing price path of a monopolist selling a durable good to buyers who arrive over time and whose values for the good evolve stochastically. The setting is completely stationary with an infinite horizon. Contrary to the case with constant values, optimal prices fluctuate with time. We argue that consumers'randomly changing values offer an explanation for temporary price reductions that are often observed in practice.

JEL codes

  • D82: Asymmetric and Private Information • Mechanism Design
  • L12: Monopoly • Monopolization Strategies

Replaces

Daniel F. Garrett, Intertemporal price discrimination: dynamic arrivals and changing values, TSE Working Paper, n. 16-679, July 2016.

Reference

Daniel F. Garrett, Intertemporal price discrimination: dynamic arrivals and changing values, American Economic Review, vol. 106, n. 11, November 2016, pp. 3275–3299.

Published in

American Economic Review, vol. 106, n. 11, November 2016, pp. 3275–3299