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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: This paper develops an oligopoly model in which firms first choose capacity and then compete in prices in a series of advance-purchase markets. We show that when the elasticity of demand falls across periods, 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 competing firms can profitably use inventory controls. 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: 48 pages
Date: 2018-06, Revised 2020-02
New Economics Papers: this item is included in nep-com, nep-gth, nep-mic, nep-ore and nep-reg
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