Advance-Purchase Discounts as a Price Discrimination Device

Volker Nocke and Martin Peitz

No 6664, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: In an intertemporal setting in which individual uncertainty is resolved over time, advance-purchase discounts can serve to price discriminate between consumers with different expected valuations for the same product. Consumers with a high expected valuation purchase the product before learning their actual valuation at the offered advance-purchase discount; consumers with a low expected valuation will wait and purchase the good at the regular price only in the event where their realized valuation is high. We provide a necessary and sufficient condition under which the monopolist's optimal intertemporal selling policy features such advance-purchase discounts.

Keywords: Advance-purchase discount; Demand uncertainty; Intertemporal pricing; Introductory offers; Monopoly pricing; Price discrimination (search for similar items in EconPapers)
JEL-codes: D42 L12 (search for similar items in EconPapers)
Date: 2008-01
New Economics Papers: this item is included in nep-com, nep-ind, nep-mic and nep-mkt
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Journal Article: Advance-purchase discounts as a price discrimination device (2011)
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