NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Intertemporal Price Discrimination in Storable Goods Markets

Igal Hendel, Aviv Nevo

NBER Working Paper No. 16988
Issued in April 2011
NBER Program(s):   EFG   IO   ME   PR

We study intertemporal price discrimination when consumers can store for future consumption needs. To make the problem tractable we offer a simple model of demand dynamics, which we estimate using market level data. Optimal pricing involves temporary price reductions that enable sellers to discriminate between price sensitive consumers, who anticipate future needs, and less price-sensitive consumers. We empirically quantify the impact of intertemporal price discrimination on profits and welfare. We find that sales: (1) capture 25-30% of the profit gap between non-discriminatory and third degree price discrimination profits, and (2) increase total welfare.

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Document Object Identifier (DOI): 10.3386/w16988

Published: “Intertemporal Price Discrimination in Storable Goods Markets”, American Economic Review 103(7), December 2013, 2722-51 (joint with Igal Hendel). citation courtesy of

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