On Dynamic Pricing

32 Pages Posted: 7 Dec 2019 Last revised: 7 Dec 2022

See all articles by Ilia Krasikov

Ilia Krasikov

Pennsylvania State University

Rohit Lamba

Pennsylvania State University - College of the Liberal Arts

Date Written: November 28, 2022


This paper builds a theory of dynamic pricing for the sale of timed goods. The main friction is private and evolving valuation of the buyer prior to the date of consumption, which follows a Poisson process. A combination of membership fee and continuously increasing prices induces a threshold response from the buyer, endogenously segmenting the market along timing of purchase. This pricing mechanism achieves the deterministic global optimum. The tools developed here are shown to be useful in thinking about global incentives in dynamic mechanisms, and mapping dynamic pricing to the classic taxonomy of consumer-producer surplus and deadweight loss.

Keywords: Price Discrimination, Dynamic Pricing, Dynamic Mechanism Design, Optimal Stopping Problem

JEL Classification: L11, L12, D82, D86

Suggested Citation

Krasikov, Ilia and Lamba, Rohit, On Dynamic Pricing (November 28, 2022). Available at SSRN: https://ssrn.com/abstract=3491015 or http://dx.doi.org/10.2139/ssrn.3491015

Ilia Krasikov

Pennsylvania State University ( email )

University Park
State College, PA 16802
United States

Rohit Lamba (Contact Author)

Pennsylvania State University - College of the Liberal Arts ( email )

University Park, PA 16802-3306
United States

HOME PAGE: http://www.rohitlamba.com

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