American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Intertemporal Price Discrimination in Storable Goods Markets
American Economic Review
vol. 103,
no. 7, December 2013
(pp. 2722–51)
Abstract
We study intertemporal price discrimination when consumers can store for future consumption needs. 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 stockpile for future consumption, and less price-sensitive consumers, who do not stockpile. We empirically quantify the impact of intertemporal price discrimination on profits and welfare. We find that sales (i) capture 25-30 percent of the gap between non-discriminatory profits and (unattainable) third-degree price discrimination profits, (ii) increase total welfare, and (iii) have a modest impact on consumer welfare.Citation
Hendel, Igal, and Aviv Nevo. 2013. "Intertemporal Price Discrimination in Storable Goods Markets." American Economic Review, 103 (7): 2722–51. DOI: 10.1257/aer.103.7.2722Additional Materials
JEL Classification
- D11 Consumer Economics: Theory
- D12 Consumer Economics: Empirical Analysis
- L11 Production, Pricing, and Market Structure; Size Distribution of Firms
- L12 Monopoly; Monopolization Strategies
- L81 Retail and Wholesale Trade; e-Commerce