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Price discrimination on booking time

Barış Ata and James Dana ()

International Journal of Industrial Organization, 2015, vol. 43, issue C, 175-181

Abstract: Even if consumers are forward looking and free to choose when to purchase, a firm can price discriminate on booking time if consumers learn their valuations at different times and consumers who learn later have higher valuations. The model is related to our work on optimal screening with returns contracts Akan, Ata, and Dana [1], but here we consider a simpler binary-valuation distribution and consider more realistic consumer learning assumptions. The main contribution is to show that the profitability of screening on time is robust to relaxing the assumption that consumers learn instantaneously. In addition to analyzing a bad-news model in which information arrives gradually, we characterize a general bound on consumer optimism that guarantees that the instantaneous learning results are robust.

Keywords: Price Discrimination; Monopoly; Mechanism Design (search for similar items in EconPapers)
JEL-codes: D82 D4 D42 D47 (search for similar items in EconPapers)
Date: 2015
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Handle: RePEc:eee:indorg:v:43:y:2015:i:c:p:175-181