Intertemporal Price Discrimination in Sequential Quantity-Price Games

James D. Dana Jr. () and Kevin R. Williams ()
Additional contact information
James D. Dana Jr.: Northwestern University
Kevin R. Williams: Cowles Foundation, Yale University, http://kevinrwilliams.com/

No 2136R2, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: When firms first choose capacity and then compete on prices in a series of advance-purchase markets, we show that strong competitive forces prevent firms from utilizing intertemporal price discrimination. We then enrich the model by allowing firms to use inventory controls, or sales limits assigned to individual prices. We show that firms will choose to set inventory controls in order to engage in intertemporal price discrimination, but only if demand becomes more inelastic over time. Thus, although typically viewed as a tool to manage demand uncertainty, we show that inventory controls can also facilitate price discrimination in oligopoly.

Keywords: Capacity-pricing games; Intertemporal price discrimination; Oligopoly models; Inventory controls (search for similar items in EconPapers)
JEL-codes: D21 D43 L13 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2018-06, Revised 2019-03
New Economics Papers: this item is included in nep-com, nep-mic and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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