Intertemporal Price Discrimination in Storable Goods Markets

37 Pages Posted: 2 May 2011

See all articles by Igal Hendel

Igal Hendel

Northwestern University - Department of Economics; National Bureau of Economic Research (NBER)

Aviv Nevo

Northwestern University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: April 2011

Abstract

We study intertemporal price discrimination when consumers can store for future consumption needs. To make the problem tractable we offer a simple model of demand dynamics, which we estimate using market level data. Optimal pricing involves temporary price reductions that enable sellers to discriminate between price sensitive consumers, who anticipate future needs, and less price-sensitive consumers. We empirically quantify the impact of intertemporal price discrimination on profits and welfare. We find that sales: (1) capture 25-30% of the profit gap between non-discriminatory and third degree price discrimination profits, and (2) increase total welfare.

Suggested Citation

Hendel, Igal E. and Nevo, Aviv, Intertemporal Price Discrimination in Storable Goods Markets (April 2011). NBER Working Paper No. w16988. Available at SSRN: https://ssrn.com/abstract=1825770

Igal E. Hendel (Contact Author)

Northwestern University - Department of Economics ( email )

2003 Sheridan Road
Evanston, IL 60208
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Aviv Nevo

Northwestern University - Department of Economics ( email )

2003 Sheridan Road
Evanston, IL 60208
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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