A Dynamic Model of Price Discrimination and Inventory Management at the Fulton Fish Market
30 Pages Posted: 15 Jul 2009
Date Written: June 2009
We estimate a dynamic profit-maximization model of a fish wholesaler who can observe consumer characteristics, set individual prices, and thus engage in third-degree price discrimination. Simulated prices and quantities from the model exhibit the key features observed in a set of high quality transaction-level data on fish sales collected at the Fulton fish market. The models predictions are then compared to the case in which the dealer must post a single price to all customers. We find the cost to the dealer of posting a uniform price to be extremely small.
Keywords: dynamic programming, fish, indirect inference, price discrimination, yield management
JEL Classification: C15, D21, D4, L1, L81
Suggested Citation: Suggested Citation