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Monopoly strategy with purchase dependent preferences and endogenous preference change

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  • Stéphane Lemarié
  • Cecilia Vergari

Abstract

We study the optimal monopoly pricing when consumers may buy one or two units of a good over two successive periods and their preferences evolve depending on past purchases and preference persistence. If the monopolist cannot discriminate between past and new buyers, he refrains from intertemporal price discrimination. Selling over two periods improves the monopoly profit as compared to the benchmark one-period equilibrium only for high preference persistence. Conversely, if the monopoly can discriminate between second period buyers, behavior-based price discrimination becomes profitable only for low preference persistence.

Suggested Citation

  • Stéphane Lemarié & Cecilia Vergari, 2021. "Monopoly strategy with purchase dependent preferences and endogenous preference change," Discussion Papers 2021/271, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    • Handle: RePEc:pie:dsedps:2021/271
    Note: ISSN 2039-1854
    as

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    File URL: https://www.ec.unipi.it/documents/Ricerca/papers/2021-271.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Repeated purchases; monopoly dynamic pricing; vertical differentiation;
    All these keywords.

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • Q10 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - General

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