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Intertemporal price discrimination in infinite horizon

Author

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  • Lionel Wilner

    (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - CNRS - Centre National de la Recherche Scientifique)

Abstract

We show that intertemporal price discrimination is used in infinite horizon by a credible durable-good monopolist under incomplete information. Consumers and the firm have different values for the trade because of distinct discount factors. We provide an analytical characterization of the optimal price policy with an ordinary differential equation depending on agents' relative patience. The gain from intertemporal price discrimination with respect to uniform pricing increases with the relative patience of the firm. Polar cases of this setting include Stokey (1979) and Landsberger and Meilijson (1985).

Suggested Citation

  • Lionel Wilner, 2014. "Intertemporal price discrimination in infinite horizon," Post-Print hal-04799376, HAL.
    • Handle: RePEc:hal:journl:hal-04799376
    DOI: 10.1016/j.econlet.2013.12.036
    Note: View the original document on HAL open archive server: https://hal.science/hal-04799376v1
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    References listed on IDEAS

    as
    1. Larry M. Ausubel & Raymond J. Deneckere, 1989. "Reputation in Bargaining and Durable Goods Monopoly," Levine's Working Paper Archive 201, David K. Levine.
    2. Stephen W. Salant, 1989. "When is Inducing Self-Selection Suboptimal for a Monopolist?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 104(2), pages 391-397.
    3. 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.
    4. Ausubel, Lawrence M & Deneckere, Raymond J, 1989. "Reputation in Bargaining and Durable Goods Monopoly," Econometrica, Econometric Society, vol. 57(3), pages 511-531, May.
    5. Nancy L. Stokey, 1979. "Intertemporal Price Discrimination," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 93(3), pages 355-371.
    Full references (including those not matched with items on IDEAS)

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