The Micro-foundations of Intertemporal Price Discrimination

Winston Koh

No 04-2005, Working Papers from Singapore Management University, School of Economics

Abstract: This paper investigates the optimality of intertemporal price discrimination for a durable-good monopoly in a model where infinitely-lived households face an intertemporal budget constraint, and consume both durable goods and non-durable goods. We prove that the optimal price of the durable good is not constant, and may decrease or increase over time. Some households may choose to purchase the durable good at a later date, and pay lower or higher prices, since the gain in discounted utility of consuming more of the non-durable good more than compensates for the loss in utility from delaying the consumption of the durable good.

Keywords: Intertemporal price discrimination; durable good monopoly; optimal pricing strategy; household demand (search for similar items in EconPapers)
JEL-codes: D40 D42 D91 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2005-01
New Economics Papers: this item is included in nep-mic, nep-sea and nep-upt
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Published in SMU Economics and Statistics Working Paper Series

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Related works:
Journal Article: The micro-foundations of intertemporal price discrimination (2006)
Working Paper: The Micro-foundations of Intertemporal Price Discrimination (2005)
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