Discussion paper

DP12034 Intertemporal Price Discrimination with Two Products

We study the two-product monopoly profit maximisation problem for a seller who can commit to a dynamic pricing strategy. We show that if consumers' valuations are not strongly-ordered then optimality for the seller can require intertemporal price discrimination: the seller offers a choice between supplying a complete bundle now, or delaying the supply of a component of that bundle until a later date. For general valuations we establish a sufficient condition for such dynamic pricing to be more profitable than mixed bundling. So we show that the Stokey (1979) no-discrimination-across-time result does not extend to two-product sellers when consumers' valuations are drawn from many standard distributions.

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Citation

Thanassoulis, J and J Rochet (eds) (2017), “DP12034 Intertemporal Price Discrimination with Two Products”, CEPR Press Discussion Paper No. 12034. https://new.cepr.org/publications/dp12034